2014 Annual Conference

City Attorneys’ Department Track

Los Angeles Convention Center Los Angeles, California

September 3-5, 2014

Name: ______

Mission Statement: To restore and protect local control for cities through education and advocacy to enhance the quality of life for all Californians.

This publication is provided for general information only and is not offered or intended as legal advice. Readers should seek the advice of an attorney when confronted with legal issues and attorneys should perform an independent evaluation of the issues raised in these materials. The League of California Cities does not review these materials for content and has no view one way or another on the analysis contained in the materials.

1400 K Street, Suite 400 Sacramento, CA 95814 916/658-8200 Fax: 916/658-8240 www.cacities.org The essential guide for researching California municipal law

Your first source for municipal law. A portable softcover with extensive updates and revisions, this handbook gives you all the background, tools, and guidance you need. It covers all the major areas of California municipal law and is known as the definitive work in its field. This collaborative work of over 300 municipal attorneys from the City Attorneys’ Department of the League of California Cities is published annually by CEB.

Order your copy now! —ships in July The California Municipal Law Handbook 2014

$329 replaced annually OnLAW MI9400-1702Z PRINT MI34044-1702Z City Attorneys—Special Offer! By special agreement between the League can receive, at no extra cost, three CEB of California Cities and CEB, any member of OnLAW subscriptions (online, searchable the League’s City Attorneys’ Department who version of the publication) to the 2014 purchases a print version of the Handbook edition of the Handbook.

1702Z web ceb.com phone 1.800.232.3444 M–F 7:30 am to 5:00 pm fax 1.800.640.6994 CEB Order Dept. mail 2100 Franklin St., Suite 500 Oakland, CA 94612-3098

ORDER: Title Item/Session Number Price Qty Subtotal

The California Municipal Law Handbook 2014 MI34044-1702Z $329 —ships in July

AMOUNT FOR PUBLICATIONS & CDs SHIP TO: STATE & LOCAL SALES TAX (CA residents only) NAME M SHIPPING $7.95 for first item, $2 for each additional item FIRM M ONLAW® , SEMINARS, PASSPORTS (no tax or shipping) ADDRESS M (STREET ADDRESS REQUIRED FOR UPS) TOTAL CITY M MSTATE MZIP

EMAIL ADDRESS M Don’t forget to METHOD OF PAYMENT: c Yes, I am a member of the City c Check enclosed (Payable to The Regents of the University of California) mention your priority Attorneys’ Department of the League of c Charge to my CEB account: ______code while ordering. California Cities and I would like to receive c Charge to my VISA, MasterCard, American Express 3 0nLAW subscriptions to The California Municipal Law Handbook 2014. CREDIT CARD NUMBER M MEXPIRATION DATE

SIGNATURE M (REQUIRED FOR CREDIT CARD APPROVAL)

TELEPHONE M

AUTOMATIC UPDATE SERVICE When you purchase a CEB practice book, you Ownership of a CEB product makes you a CEB receive the current update at no extra cost. If Automatic Update Customer. Updates, revisions, an update to a hardcover book, an Action Guide and new editions of CEB books, Action Guides, revision, or a revised edition of an annual or SATISFACTION Thank you and software will be sent to you automatically as biennial publication is published within 90 they are released with an invoice. You may cancel days after you purchase a CEB publication, CEB GUARANTEE this service at any time. will send you a free copy of the new update or If for any reason you for your order! SEMINARS All seminar information—including revised annual as long as you are an Automatic prices, speakers, locations, and specialization credit— Update Service Customer. If a new edition of a are not satisfied with a CEB CUSTOMER SERVICE is subject to change. No cancellations or refunds are hardcover book is published within six months allowed after presentation of the seminar or if you after you have purchased the previous edition, CEB product, return it attend any portion of the seminar. Discounts cannot you can apply the amount you paid as a credit within 30 days of the be combined. Recording of CEB programs is not per- toward purchase of the new edition. ® We’re on the line! mitted. CEB uses ADA approved facilities. Disabled ONLAW is a Web-based subscription product invoice date, and we’ll persons requiring special assistance, please contact offered on an annual basis. Purchase constitutes CEB at 1-800-232-3444. CEB is a State Bar of Califor- a 12-month contract and will be automatically refund your money. CALL US AT 1-800-232-3444 nia approved MCLE provider. renewed after one year. To cancel, just let CEB know ALL PRICES SUBJECT TO CHANGE. you will not be renewing. Discounts cannot be combined.

CONTINUING EDUCATION OF THE BAR • CALIFORNIA UNIVERSITY OF CALIFORNIA

fullbw 09052014yk fullbw 04242014mc

City Attorneys’ Department Track 2014 League of California Cities® Annual Conference Program Materials Table of Contents Page

I. About MCLE Credit ...... iii

II. Program ...... iv

III. Program Materials a. Fair Housing Claims and Enforcement Actions ...... 1 Jeffrey S. Ballinger, City Attorney, Fontana and San Jacinto, Assistant City Attorney, Big Bear Lake

b. Responding to Federal Fair Housing Investigations: When the DOJ Comes Calling ...... 23 Toussaint S. Bailey, Richards, Watson & Gershon

c. Creating and Operating Nonprofit Organizations ...... 43 Shahiedah S. Coates, Jenkins & Hogin

d. Environmental Legal Issues and Due Diligence When Cities Acquire Real Property ...... 63 Danielle G. Sakai, Best Best & Krieger

e. Urban Redevelopment and Assembly Bill 440 – the “New” Polanco Act...... 81 Leah S. Goldberg, Senior Deputy City Attorney, San Jose

f. Regulatory Issues Related to Brownfield Remediation ...... 89 Barbara J. Cook, Division Chief, Brownfields & Environmental Reuse Program, California Department of Toxic Substances Control

g. FPPC Update ...... 93 Shawn M. Mason, City Attorney, San Mateo

h. Police Officer or Deputy City Attorney as Whistleblower ...... 101 James “Jeb” E. Brown, Supervising Deputy City Attorney, Riverside

III. Program Materials (continued) i. Land Use and CEQA Litigation Update ...... 123 Rick W. Jarvis, Jarvis Fay Doporto & Gibson

j. EPMC, PEPRA, PERS and PEMHCA – Controlling Employee Pension and Retiree Medical Benefit Costs ...... 143 Steven M. Berliner, Liebert Cassidy Whitmore

k. City Attorney Retirement/PERS Annuitant Issues/ Revolving Door Statutes ...... 153 Michael H. Roush, Interim Assistant City Attorney, Stockton

l. General Municipal Litigation Update ...... 167 Kevin D. Siegel, Burke, Williams & Sorensen

m. Legislative Prayer (Invocation) Policies in the Wake of the U.S. Supreme Court Ruling in Greece v. Galloway ...... 201 Allison E. Burns, City Attorney, Lancaster

n. Elimination of Bias Related to Religion ...... 221 J. Scott Tiedemann, Liebert Cassidy Whitmore

o. Legislative Update ...... 243 Patrick Whitnell, General Counsel, League of California Cities

p. Municipal Tort and Civil Rights Litigation Update ...... 247 Eugene P. Gordon, Office of the City Attorney, San Diego

q. Complying with the Americans with Disabilities Act (Accessibility Barriers and Improvements) ...... 275 Bruce A. Soublet, Sr. Assistant City Attorney, Richmond

r. Inclusionary Housing Requirements: Still Possible? ...... 293 Andrew L. Faber, Berliner Cohen

s. Labor and Employment Litigation Update ...... 309 Richard S. Whitmore, Liebert Cassidy Whitmore

IV. Speakers’ Biographies ...... 361

MCLE Information

The League of California Cities is a State Bar-certified minimum continuing legal education (MCLE) provider. This activity is approved for 11.75 hours of MCLE credit, which includes 1 hour of MCLE specialty credit for Elimination of Bias in the Legal Profession sub-field credit.

Registration Check-In

MCLE credit is being tracked through your registration for the conference. At the time that you check-in at the registration desk, you will be required to verify your State Bar number and this will serve as proof of your attendance.

Certificate of Attendance

Certificates of attendance are available on the materials table at the back of the City Attorneys’ session room until the conclusion of the conference. Please make sure you pick up your attendance certificate. Only one attendance certificate for all of the City Attorney sessions at this conference will be provided. You are responsible for calculating the total MCLE credit earned.

Evaluations

PLEASE TELL US WHAT YOU THINK! We value your feedback. Hard copy evaluation forms for the MCLE-approved sessions are available at the tables located in the back of the room. An electronic version of the evaluation is available at: http://www.cacities.org/caevaluations and will also be emailed after the conference. Please tell us what you liked, what you didn’t, and what we can do to improve this learning experience.

iii

2014 ANNUAL CONFERENCE Wednesday, September 3 - Friday, September 5 Los Angeles Convention Center

CITY ATTORNEYS’ DEPARTMENT PROGRAM

2013-2014 City Attorneys’ Department Officers: President: Thomas B. Brown, City Attorney, St. Helena 2nd Vice President: Christi Hogin, City Attorney, Lomita, Malibu & Palos Verdes Estates Director: Craig Labadie, City Attorney, Albany

Wednesday—September 3

8:00 a.m. – 6:00 p.m. Registration Open

1:00 – 2:45 p.m. General Session Room 403AB, 2nd Floor Moderator: Christi Hogin, City Attorney, Lomita, Malibu & Palos Verdes Estates

Fair Housing Claims and Enforcement Actions Speaker: Jeffrey S. Ballinger, City Attorney, Fontana and San Jacinto, Assistant City Attorney, Big Bear Lake

Responding to Federal Fair Housing Investigations: When the DOJ Comes Calling Speaker: Toussaint S. Bailey, Richards, Watson & Gershon

Creating and Operating Nonprofit Organizations Speaker: Shahiedah S. Coates, Jenkins & Hogin

3:00 – 5:00 p.m. Annual Conference General Session

5:00 – 7:00 p.m. Host City Reception & Expo

2014 League of California Cities Annual Conference – City Attorneys’ Track Los Angeles Convention Center, Los Angeles

iv Thursday—September 4

7:00 a.m. – 4:00 p.m. Registration Open

8:00 – 9:30 a.m. General Session Room 403AB, 2nd Floor Moderator: Thomas B. Brown, City Attorney, St. Helena

Environmental Legal Issues and Due Diligence When Cities Acquire Real Property Speaker: Danielle G. Sakai, Best Best & Krieger

Urban Redevelopment and Assembly Bill 440 – the “New” Polanco Act Speaker: Leah S. Goldberg, Senior Deputy City Attorney, San Jose

Regulatory Issues Related to Brownfield Remediation Speaker: Barbara J. Cook, Division Chief, Brownfields & Environmental Reuse Program, California Department of Toxic Substances Control

9:45 – 10:45 a.m. Annual Conference General Session

11:00 a.m. – Noon General Session Room 403AB, 2nd Floor Moderator: Christi Hogin, City Attorney, Lomita, Malibu & Palos Verdes Estates

FPPC Update Speaker: Shawn M. Mason, City Attorney, San Mateo

Police Officer or Deputy City Attorney as Whistleblower Speaker: James “Jeb” E. Brown, Supervising Deputy City Attorney, Riverside

11:30 a.m. – 1:00 p.m. Annual Conference Expo Exclusive with Lunch

1:00 – 2:15 p.m. General Session Room 403AB, 2nd Floor Moderator: Thomas B. Brown, City Attorney, St. Helena

Welcoming Remarks Speaker: Michael N. Feuer, City Attorney, Los Angeles

Department Business Meeting – President’s Report (Tom) – Director’s Report (Craig) – Nominating Committee Report (Brian Libow) – Election of Department Officers (Tom)

Land Use and CEQA Litigation Update Speaker: Rick W. Jarvis, Jarvis Fay Doporto & Gibson

2014 League of California Cities Annual Conference – City Attorneys’ Track Los Angeles Convention Center, Los Angeles

Thursday—September 4 (continued)

2:30 – 3:45 p.m. General Session Room 403AB, 2nd Floor Moderator: Craig Labadie, City Attorney, Albany

EPMC, PEPRA, PERS and PEMHCA – Controlling Employee Pension and Retiree Medical Benefit Costs Speaker: Steven M. Berliner, Liebert Cassidy Whitmore

City Attorney Retirement/PERS Annuitant Issues/Revolving Door Statutes Speaker: Michael H. Roush, Interim Assistant City Attorney, Stockton

4:00 – 5:15 p.m. General Session Room 403AB, 2nd Floor Moderator: Christi Hogin, City Attorney, Lomita, Malibu & Palos Verdes Estates

General Municipal Litigation Update Speaker: Kevin D. Siegel, Burke, Williams & Sorensen

Legislative Prayer (Invocation) Policies in the Wake of the U.S. Supreme Court Ruling in Greece v. Galloway Speaker: Allison E. Burns, City Attorney, Lancaster

2014 League of California Cities Annual Conference – City Attorneys’ Track Los Angeles Convention Center, Los Angeles

vi Friday—September 5

7:30 – 10:00 a.m. Registration Open

8:00 – 10:00 a.m. General Session Room 403AB, 2nd Floor Moderator: Craig Labadie, City Attorney, Albany

Elimination of Bias Related to Religion (MCLE Specialty Credit for Elimination of Bias in the Legal Profession) Speaker: J. Scott Tiedemann, Liebert Cassidy Whitmore

Legislative Update Speaker: Patrick Whitnell, General Counsel, League of California Cities

Municipal Tort and Civil Rights Litigation Update Speaker: Eugene P. Gordon, Office of the City Attorney, San Diego

10:15 a.m. – Noon General Session Room 403AB, 2nd Floor Moderator: Thomas B. Brown, City Attorney, St. Helena

Complying with the Americans with Disabilities Act (Accessibility Barriers and Improvements) Speaker: Bruce A. Soublet, Sr. Assistant City Attorney, Richmond

Inclusionary Housing Requirements: Still Possible? Speaker: Andrew L. Faber, Berliner Cohen

Labor and Employment Litigation Update Speaker: Richard S. Whitmore, Liebert Cassidy Whitmore

Noon – 2:00 p.m. Closing Annual Conference Business Meeting and Voting Delegate Luncheon

MCLE Credit – 11.75 Hours The League of California Cities1 is a State Bar of California minimum continuing legal education (MCLE) approved provider and certifies this activity meets the standards for MCLE credit by the State Bar of California in the total amount of 11.75 hours, including one hour of Elimination of Bias in the Legal Profession sub-field credit.

1 Provider No. 1985

2014 League of California Cities Annual Conference – City Attorneys’ Track Los Angeles Convention Center, Los Angeles

vii

This page left intentionally blank.

2014 League of California Cities Annual Conference – City Attorneys’ Track Los Angeles Convention Center, Los Angeles

Fair Housing Claims and Enforcement Actions

Wednesday, September 3, 2014 General Session; 1:00 – 2:45 p.m.

Jeffrey S. Ballinger, City Attorney, Fontana and San Jacinto, Assistant City Attorney, Big Bear Lake

DISCLAIMER: This paper is not offered as or intended to be legal advice. Readers and conference attendees should seek the advice of an attorney when confronted with legal issues. Attorneys should perform an independent evaluation of the issues raised in these materials.

This paper, or parts thereof, may not be reproduced in any form without express written permission from the League of California Cities®. For further information, contact the League of California Cities at 1400 K Street, 4th Floor, Sacramento, CA 95814. Telephone: (916) 658-8200.

1 Notes:______

League of California Cities 2014 Annual Conference Los Angeles, California

Fair Housing Claims & Enforcement Actions

Jeffrey S. Ballinger, Partner Best Best & Krieger LLP

3 Fair Housing Claims & Enforcement Actions

I. Fair Housing Amendment Act Theories

In an action under the federal Fair Housing Amendments Act (“FHAA”)1, a plaintiff may prevail on any one of three theories: (1) disparate treatment, also called intentional discrimination; (2) disparate impact, also called discriminatory effect; and (3) failure to reasonably accommodate. Nevada Fair Housing Ctr., Inc. v. Clark County, 565 F.Supp.2d 1178 (D. Nev. 2008); S. Cal. Housing.Rights Ctr. v. Ass’n & Los Feliz Towers Homeowners Ass’n Bd. of Dirs., 426 F.Supp.2d 1061, 1066 (C.D. Cal. 2005) (citing Gamble v. City of Escondido, 104 F.3d 300, 304 (9th Cir. 1997)).

A. Disparate Treatment/Intentional Discrimination

To bring a disparate treatment claim, the plaintiff must first establish a prima facie case. The prima facie case elements are: (1) plaintiff is a member of a protected class; (2) plaintiff applied for some right/privilege and was qualified to receive it; (3) the right/privilege was denied despite plaintiff being qualified; and (4) defendant approved a right/privilege for a similarly situated party during a period relatively near the time plaintiff was denied its right/privilege. Gamble v. City of Escondido, 104 F.3d 300, 305 (9th Cir. 1997). Second, if the plaintiff establishes the prima facie case, the burden shifts to the defendant to articulate a legitimate, nondiscriminatory reason for its action. Id.2 Third, if the defendant satisfies its burden, the plaintiff must prove by a preponderance of evidence that the reason asserted by the defendant is a mere pretext. Id.

In lieu of satisfying the elements of a prima facie case, a plaintiff may also simply produce direct or circumstantial evidence demonstrating that a discriminatory reason “more likely than not motivated” the challenged decision. Budnick v. Town of Carefree, 518 F.3d 1109, 1114 (9th Cir. 2008) (citing McGinest v. GTE Serv. Corp., 360 F.3d 1103, 1122-23 (9th Cir. 2004); Metoyer v. Chassman, 504 F.3d 919, 931 (9th Cir. 2007); Lowe v. City of Monrovia, 775 F.2d 998, 1006 (9th Cir. 1985), amended on other grounds by 784 F.2d 1407 (9th Cir. 1986)). “Under either method . . . plaintiff must counter the defendant’s explanation with some evidence suggesting that the challenged action ‘was due in

1 42 U.S.C. 3601, et seq; 24 CFR Parts 100, 103, and 104.

2 As a part of the burden shifting scheme, the Ninth Circuit appears to only require a defendant to articulate a legitimate, nondiscriminatory reason for its action. Budnick v. Town of Carefree, 518 F.3d 1109, 1114 (9th Cir. 2008); Community House, Inc. v. City of Boise, 490 F.3d 1041, 1053 (9th Cir. 2007); Gamble v. City of Escondido, 104 F.3d 300, 305 (9th Cir. 1997).

4 part or whole to discriminatory intent.’” Id. Proof of discriminatory motive is crucial to a disparate treatment claim. Id.

Case law also supports the position that FHAA plaintiffs can bring challenges against municipalities based on their zealous enforcement of their zoning regulations. See Oxford House-C v. City of St. Louis, 843 F.Supp. 1556, 1583 250 (E.D. Mo. 1994), reversed on other grounds, 77 F.3d 249 (8th Cir. 1996) (finding no differential treatment in enforcement); see United States v. Audubon, 797 F.Supp. 353, 353 (D.N.J. 1991) (finding zealous enforcement based on facts, including prior lax enforcement).

B. Disparate Impact

To establish a prima facie disparate impact case, a plaintiff must establish “‘at least that the defendant’s actions had a discriminatory effect.’” Gamble v. City of Escondido, 104 F.3d 300, 306 (9th Cir. 1997). The prima facie elements are (1) the occurrence of certain outwardly neutral practices, and (2) a significantly adverse or disproportionate impact on persons of a particular type produced by the defendant’s facially neutral acts or practices. Id. (quotations omitted); Smith v. Brown, 2010 U.S. Dist. LEXIS 91696, *14-15 (W.D. Wa. 2010). The burden then shifts to defendant to demonstrate a “legally sufficient non-discriminatory reason.” Alamar Ranch, LLC v. County of Boise, 2010 U.S. Dist. LEXIS 40978, 18 (D. Idaho Apr. 27, 2010). 3 If the defendant satisfies its burden, the plaintiff must at least raise a genuine factual question as to whether the reason asserted by the defendant is a mere pretext. Moua v. City of Chico, 324 F.Supp.2d 1132, 1142 (E.D. Cal. 2004).

“Demonstration of discriminatory intent is not required under disparate impact theory.” Id. “However, a plaintiff must ‘prove the discriminatory impact at issue; raising an inference of discriminatory impact is insufficient.’ ” Id.

In examining disparate impact, the courts have looked to analysis of claims under the Age Discrimination in Employment Act. Alamar Ranch, LLC v.

3 Under the burden shifting framework, it appears that courts in the Ninth Circuit only require a defendant to show a “legally sufficient non-discriminatory reason" for its action. Budnick v. Town of Carefree, 518 F.3d 1109, 1118 (9th Cir. 2008) (citing Affordable Hous. Dev. Corp. v. City of Fresno, 433 F.3d 1182, 1194 (9th Cir. 2006)); Alamar Ranch, LLC v. County of Boise, 2010 U.S. Dist. LEXIS 40978, 18 (D. Idaho Apr. 27, 2010). However, courts in other jurisdictions appear to require a different showing: a defendant must show that “its actions furthered, in theory and in practice, a legitimate, bona fide governmental interest and that no alternative would serve the interest with less discriminatory effect.” Resident Advisory Bd. v. Rizzo, 564 F.2d 126, 149 (3rd Cir. 1997) (applied in assessing a discriminatory effect claim, i.e., disparate impact); Jeffrey O. v. City of Boca Raton, 511 F.Supp.2d 1339, 1356 (S.D.Fl. 2007) (assessing under disparate impact); Oxford House, Inc. v. Town of Babylon, 819 F.Supp. 1179, 1182 (E.D.N.Y. 1993) (assessing disparate impact claim) (citing Resident Advisory Bd., 564 F.2d at 148-49); Human Research and Management Group, Inc. v. County of Suffolk, 687 F.Supp.2d 237, 255-57 (E.D.N.Y. 2010) (discussing scrutiny standards in context of facial challenge).

5 County of Boise, 2010 U.S. Dist. LEXIS 40978, 18 (D. Idaho Apr. 27, 2010) (citing Pfaff v. U.S. Dep’t of Hous. and Urban Dev’t, 88 F.3d at 745; Keith v. Volpe, 858 F.2d 467, 482 (9th Cir. 1988)). “In such cases, the plaintiffs must show action by defendant that is neutral on its face, but that has a “significantly adverse or disproportionate impact on persons of a particular [type].” Id. (Pfaff, 88 F.3d at 745, quoting Palmer v. United States, 794 F.2d 534, 538 (9th Cir. 1986)(other citations omitted)). “The courts have looked to statistical evidence for proof of a disparate impact.” Id.

C. Reasonable Accommodation

The FHAA imposes an affirmative duty to reasonably accommodate handicapped persons. 42 U.S.C. § 3604 (f)(3)(B); 24 C.F.R. § 100.204; see also City of Edmonds v. Washington State Bldg. Code Council, 18 F.3d 802, 806 (9th Cir. 1994), aff’d by, City of Edmonds v. Oxford House, 514 U.S. 725, 115 S.Ct. 1776, 131 L.Ed. 2d 801 (1995). The congressional intent behind the FHA was to “protect the right of handicapped persons to live in the residence of their choice in the community.” Edmonds, 18 F.3d at 806. In order to facilitate this intent, “[w]hile a [city] need not be required to make ‘fundamental’ or ‘substantial’ modifications to accommodate the handicapped, it may be required to make reasonable ones.” Id. (quotations omitted) (citing Alexander v. Choate, 469 U.S. 287, 300, 83 L.Ed. 2d 661, 105 S.Ct. 712 (1985)). Whether an accommodation is reasonable and satisfies the FHAA will vary depending on the facts of a given case. Id. (indicating factual scenarios involving whether a “city’s zoning satisfies FHAA standards, or whether a city has to alter neutral zoning policies to reasonably accommodate and integrate handicapped persons”).

The duty of providing “reasonable accommodations” is borrowed from case law interpreting the Rehabilitation Act. Edmonds, 18 F.3d at 806 (citing Southeastern Community College v. Davis, 442 U.S. 397, 60 L.Ed. 2d 980, 99 S.Ct. 2361 (1979)). Thus Courts many times turn to Rehabilitation Act cases for guidance. Similarly, case law on the Americans with Disabilities Act on reasonable accommodations is also considered. See Giebeler v. M & B Associates, 343 F.3d 1143,1149-50 (9th Cir. 2003).

As applied to municipalities, the most common reasonable accommodation claims arise in the context of challenges to zoning and land use regulations.4 See e.g., City of Edmonds v. Washington State Bldg. Code Council, 18 F.3d 802, 805 (9th Cir. 1994). For example, the FHAA has been applied to the application of neutral zoning rules which have operated to bar group homes of handicapped persons from operating in certain areas. Id. (citing Smith & Lee Assocs., Inc. v. Taylor, No. 92-1903, slip op. at 19, 1993 U.S. App. LEXIS 33971, * 30 (6th Cir. Dec. 30, 1993) (applied to single-family zone permitting nonprofit

4 Relevant case law will be discussed below.

6 housekeeping units) (citing Oxford House, Inc. v. Cherry Hill, 799 F.Supp. 450 (D.N.J. 1992)(applied to single-family zone burdening unrelated persons))).

To show discrimination under the FHAA based on failure to provide reasonable accommodation, plaintiff must demonstrate that: (1) he or she suffers from handicap as defined by the FHAA; (2) defendants knew or reasonably should have known of plaintiff’s handicap; (3) accommodation of handicap may be necessary to afford plaintiff equal opportunity to use and enjoy dwelling; and (4) defendants refused to make such accommodation.5 S. Cal. Housing Rights Ctr. v. Ass’n & Los Feliz Towers Homeowners Ass’n Bd. of Dirs., 426 F.Supp. 2d 1061, 1066 (C.D. Cal. 2005) (citing United States v. California Mobile Home Park Mgmt. Co, 107 F.3d 1374, 1380 (9th Cir. 1997); Giebler v. M&B Associates, 343 F.3d 1143, 1148 (9th Cir. 2003)).

II. Case Law on FHAA Actions Against Municipalities Based on Reasonable Accommodations

A. Zoning Procedures

1. A FHAA Plaintiff Must First Utilize a City’s Zoning Procedures before Filing Suit.

While no Ninth Circuit or Supreme Court case is on point, at least two circuit court cases hold that a FHAA plaintiff must first utilize a City’s zoning procedures before filing suit.

In the Eighth Circuit for instance, the Oxford House-C Court took the position that when a zoning ordinance definition is challenged, plaintiffs must allow the City an opportunity to reasonably accommodate by utilizing zoning procedures before filing suit. In Oxford House-C, plaintiffs filed suit alleging that the City violated the FHAA and the Rehabilitation Act by “enforcing the City’s zoning code to limit the number of residents in two group homes for recovering substance abusers.” Oxford House-C v. City of St. Louis, 77 F.3d 249, 250 (8th Cir. 1996). The two homes were zoned for single family dwellings. Id. at 251. The City’s zoning code defined single family dwellings to include group homes with eight or fewer unrelated handicapped residents. Id. City inspections revealed

5 For a discussion of the relevant law and application of the definition of handicapped in FHAA context, see Prindable v. Association of Apartment Owners of 2987 Kalakaua, 304 F.Supp. 2d 1245, 1254-55 (D. Haw. 2003) (regarding reasonable accommodation and no-pets clause by private landlord). For a discussion of general case law on the necessity of the accommodation requested, see Prindable, 304 F.Supp. at 1256. For a discussion of the general case law on the reasonableness of the accommodation, see Prindable, 304 F.Supp. at 1257-58. For a discussion of the general case law on the refusal to make the requested accommodation, see Prindable, 304 F.Supp. at 1258.

7 that more than eight recovering men were living at each home, thus the City cited the houses for violating the eight-person limit. Id. plaintiffs did not apply for a variance, but instead filed suit. Id. At issue was whether the City had unlawfully discriminated against Oxford House-C residents,6 failed to accommodate them, and interfered with their housing rights. Id. The court concluded that the City did not fail to accommodate because the plaintiffs needed to give the City an opportunity to accommodate them, and failure to apply for variances did not give the City such chance. Id. at 253.

The Seventh Circuit has promulgated a similar principle. In U.S. v. Village of Palatine, the Court held that a plaintiff must allow a municipality the opportunity to make a reasonable accommodation through the municipalities’ lawful procedures for zoning as long as such procedures would not be manifestly futile. U.S. v. Village of Palatine, 37 F.3d 1230, 1234 (7th Cir. 1994). The relevant facts of the case were as follows:

Oxford House-Mallard is located in an R-1B Single Family District in Palatine. “Permitted” uses as of right for R-1B residences include “single-family detached dwellings” and “group homes” that are licensed or certified by the state, with no more than eight persons plus staff. The zoning ordinance defines “family” as, inter alia, a nuclear family plus not more than three relatives, or a group of up to three non-relatives. Its definition of “group home” includes the requirement of paid professional support staff. The eleven unrelated residents of Oxford House- Mallard do not meet the definition of “family,” nor does the unlicensed, unstaffed facility meet the definition of “group home.”

Id. at 1231-32. “Thus the zoning ordinance d[id] not allow Oxford House- Mallard to operate in the R-1B Single Family District as of right.” Id. at 1232. However,

[c]ertain “special uses” are also allowed in R-1B districts when they are authorized by the Village. Such uses include group homes that are not licensed or certified by the state, or those that are licensed or certified but have nine or more residents. At the time Oxford House-Mallard was established there was no allowance in the zoning ordinance for a special use approval for a group home of any size that was not professionally staffed, but subsequently the Village amended its ordinance to allow a special use approval for a group home without professional staffing. Id.

The organizers of Oxford House-Mallard “did not seek a special use approval from the Village,” and “after the residents moved into the property, the Village

6 The Court discussed at length why no discriminatory intent was established. See id. at 252.

8 inspected the residence several times and cited it for violations of its rental property licensing requirements and its Life Safety Code.” Id. A HUD Complaint and litigation ensued. Id.

The Palatine Court considered the arguments of the parties and rejected Oxford House-Mallard’s argument that requiring plaintiff to use the procedures for obtaining special use approval is a failure in and of itself to make a reasonable accommodation. Id. at 1233-34.7 The Court noted that certain zoning procedures may be impermissible under the FHAA. For example, a “procedure may not be required only of the handicapped but not of other people.” Id. (citing Marbrunak, Inc. v. City of Stow, 974 F.2d 43, 46 (6th Cir. 1992)). Also, a “procedure, neutral on its face, may not be applied in a discriminatory manner.” Id. (citing Potomac Group Home Corp. v. Montgomery County, 823 F.Supp. 1285, 1297 (D. Md. 1993)). And in the case, plaintiff showed no facts that the zoning procedures would so violate the FHAA. The Court did recognize that resort to such procedures would not be necessary if “such resort is manifestly futile.” Id. citing Oxford House-C v. City of St. Louis, 843 F.Supp. 1556, 1570, 1582 (E.D. Mo. 1994) (city routinely granted or denied variances or conditional use approvals based on neighbor and aldermanic support or opposition)). And in the case, the Village had shown ample facts of how it responds to the needs of the handicapped and has made zoning changes before to accommodate the handicapped. Id.

2. A City’s requirement that a FHAA Plaintiff Obtain Special/Conditional Use Permits and/or be subject to certain Conditions Does Not Necessarily Run Afoul of the FHAA.

At least one Ninth Circuit case stands for the proposition that the requirement of a special use permit (“SUP”) can be considered a reasonable accommodation assuming the conditions placed on the SUP’s issuance are reasonable based on the facts of the case. In this case, plaintiff intended to operate a homeless shelter housing 39 occupants. Turning Point v. City of Caldwell, 74 F.3d 941, 942 (9th Cir. 1996). Upon inspection after a fire, plaintiff Turning Point was advised via letter of various Uniform Code violations and improvements that needed to be made so that it could operate as a residence housing more than 10 persons. Id. Turning Point contacted the City’s Planning Director and was advised that its property was “in a commercial zone, C-2,” that it was characterized as “a boardinghouse, the maximum occupancy of which was limited to 12 persons by the city’s zoning ordinance,” and that if “Turning Point wanted to house more than 12, the residence would have to be reclassified as

7 Plaintiff complained of the stigma of a public hearing and the burden on its residents to attend such hearing. Id. at 1233. Nonetheless, the Court refused to “impose a blanket requirement that cities waive their public notice and hearing requirements in all cases involving the handicapped.” Id. at 1234

9 “public/semi-public housing”; to have such a use in a C-2 commercial zone8 would require a SUP.” Id. at 943. In response:

Turning Point filed for a SUP stating that it wanted to operate a congregate residence [which was not a “boarding house”] to serve homeless persons and that in the past it had accommodated an average of 33 homeless individuals. It asked to be permitted to accommodate up to 40 residents . . . . Id.

Turning Point only housed 12 residents at the time in order to observe the residency restriction. Id. The City granted the SUP “with a maximum occupancy limited to 25 individuals including one resident staff member; a requirement of .33 parking spaces per person; a requirement of a new sidewalk and landscaping; and a requirement of annual review of the SUP.” Id.

The lawsuit ensued, alleging, among other things, that the SUP requirement violated the FHAA. Id. at 944. The magistrate judge below determined that the occupancy limitation

“was not calculated according to any uniform code or zoning ordinance; was not designed to preserve the character of a single- family residential zone . . .; and was a severe financial burden on Turning Point that would eventually force it to close,” such that it was a failure to make a reasonable accommodation . . . .

[Thus, a]s a remedy for this violation, the court ordered that the occupancy be set at 25. The court further reduced the parking requirement of a total of 5 off-street parking spaces. It also eliminated as unreasonable the requirement for a new sidewalk and the requirement for new landscaping.

At the same time, the court upheld the SUP’s requirement that Turning Point maintain the historic integrity of 703 Belmont; that it observe certain conditions as to garbage and as to vegetation and as to a secure play area for children. The court regarded regular review of the SUP as “a crucial component” because accommodations that might be “reasonable at this time may later become unreasonably burdensome to Defendants due to a change of circumstances.” Id.

8 According to the zoning ordinance, a C-2 zone is to "fulfill shopping retail needs including central business area preferences." The zoning permits mobile homes on single family lots in the area; it also permits a car wash, a service station and a tire shop without any requirement of a SUP. Public and semi-public uses, which are identified as including schools, churches, cemeteries and hospitals, may be located in a C-2 zone only by grant of a SUP. Id.

10 The only issue on appeal was Turning Point’s contention that annual review of the SUP was not justified, and on the facts of the case, the Court of Appeals agreed. Id. at 945.

In a similar case, the Fifth Circuit upheld a City’s zoning ordinance that required a permit application for a group of three or four unrelated and disabled persons living together, which was challenged as a being applied in a manner that failed to reasonably accommodate the needs of the disabled. Elderhaven, Inc. v. City of Lubbock, 98 F.3d 175, 176 and 178 (5th Cir. 1996). In that case, the Court determined that such permit requirement was reasonable, especially given that the City applied it flexibly and with little burden on plaintiffs.

The facts are as follows: Elderhaven was a corporation organized for the purpose of providing alternative living arrangements for elderly disabled persons. Id. at 176. Elderhaven bought a house, which was located in a portion of the City that was zoned as R-1. Id. R-1 land was designed as single family residential. Id. “Family” was defined as “(i) any number of persons related by blood, marriage, or adoption, or (ii) any two unrelated persons living and cooking together as a unit.” Id. Because Elderhaven’s proposed use was not in accordance with the City’s zoning laws, Elderhaven began a dialogue with City officials regarding its plans for the home and regarding the City’s duty to comply with the Fair Housing Act. Id. This dialogue included Elderhaven’s application for a variance under the zoning laws, which was denied. Id. This denial resulted in the City passing Ordinance 9489, which amended the City’s Code of Ordinances to provide a new regulatory zoning scheme for land uses within R-1 zones. Id. It provided:

Any group of persons related by blood, marriage, or adoption, whether disabled or non-disabled, may live together as a single family in a residence. One or two persons, disabled or non- disabled, who are not related by blood, marriage, or adoption may live and cook together as a single family unit. Three or four persons disabled but not related by blood, adoption, or marriage, may live together in a residence so long as they first obtain a permit from the director of planning of the City of Lubbock. Groups of five or more disabled persons may apply for a special exception from the ZBA to the otherwise applicable limits on the use of plots of land within the R-1 zone. Lubbock law prohibits all other uses unless the landowner obtains a variance. Id.

The ordinance outlined the requirements to obtain a permit by three of four disabled persons seeking to live together in a R-1 Zone: the permit “must include a rudimentary site plan illustrating compliance with minimum square footage requirements for bedrooms;” “[n]o bedroom may house more than two persons;” the application ‘must designate a person labeled a ‘care-provider,’ who will be responsible for compliance with the ordinance, and the ‘care-provider’ must have a ‘separate bedroom’;” the relevant City “authorities must conduct a

11 health inspection of the facility;” a “group living arrangement for the disabled may not be located within 600 feet of another group living arrangement already in place;” the “permitting process takes between 10 and 14 days to complete” and “[o]nce issued, a permit may be renewed annually so long as the ‘care-provider’ keeps the facility in compliance with the ordinance.”

The ordinance also outlined the requirements to obtain a special exception by a group of five or more disabled individuals seeking to live together in a R-1 Zone:

An application including a site plan is submitted; the relevant Lubbock authorities must conduct a health and fire inspection; all persons owning property within 200 feet of the structure at issue are given notice; and the ZBA holds a public hearing at which all persons may express an opinion before making a decision on whether to grant a special exemption. The Ordinance subjects a facility attempting to qualify for a special exemption to all the requirements of the permitting process described above except three: the minimum square footage per bedroom, the limit of two persons per bedroom, and the designation of a separate bedroom for the “care provider.” Id.

Elderhaven applied to obtain this special exemption to allow it to house up to 12 elderly disabled individuals. Id. at 177. The City authorized Elderhaven to house 10 persons. Id. Elderhaven sued, contending that Ordinance 9489 discriminated against persons with disabilities. Id.

The Court, upon review of a grant of summary judgment, determined that Elderhaven did not bear its burden of proving that the City had failed to reasonably accommodate. Id. at 177-78. The Court did not find that Elderhaven raised a genuine issue of material fact to show that the City applied Ordinance 9489 in a manner that failed to reasonably accommodate. Id. at 178. It noted that the “undisputed evidence in the record reflected the City’s willingness to interpret its ordinance flexibly and in accordance with the circumstances of each case.” Id. (also noting that while the permitting process and inspections “might be wholly inappropriate for certain situations, . . . the record illustrates the City’s willingness to adjust under these circumstances”). The Court considered that “[s]uch flexibility may be an essential component of a process designed to provide reasonable accommodation and to operate in the marginal circumstances of the market.” Id. The Court also reasoned that while a “municipality may violate the [FHAA] by placing unduly burdensome conditions upon a proposed residence for the disabled,” in the present case, the “City’s permitting process . . . [was] relatively rapid, and its inspections and building requirements [were] not unusually burdensome.” Id. Further, it noted that the City’s interest in the inspections and permitting process was apparent from the face of the ordinance, which stated: “WHEREAS, it has been the experience of the City of Lubbock that unregulated and unlicensed homes for handicapped persons may not

12 necessarily provide adequately for the health and safety of the residents.” Id. Finally, the Court also noted how Elderhaven failed to allege, and more so prove, that it needed a higher residency number. Id.

Thus, assuming that a city operates reasonably and flexibly in requiring FHAA plaintiffs to apply for permits in order to operate in areas they are not zoned for, such requirements can be in accordance with the FHAA.

Furthermore, even imposing additional conditions or restrictions on an FHAA plaintiff is permissible so long as done reasonably and tailored to the needs to the FHAA plaintiff. Thus, for example, one case out of the Sixth Circuit opined that the FHAA “does not prohibit the city from imposing any special safety standards for the protection of developmentally disabled persons.” Marbrunak, Inc. v. Stow, 974 F.2d 43, 47 (6th Cir. 1992). Rather, cities may impose standards which are different from those to which it subjects the general population, so long as that protection is demonstrated to be warranted by the unique and specific needs and abilities of those handicapped persons.” Id. In the case however, the Court found that the defendant city made a FHAA violation because the City’s extensive safety precautions were not individualized for the subject property and/or its inhabitants. Id. at 43 and 47.

In that case, plaintiff had desired to operate a residence for “four mentally retarded adult women,” but the property intended for this residence was located in an area zoned for single-family dwellings. Id. at 44. This zoning classification would not permit such residence. Thus, the City advised plaintiff that “they would need a conditional-use permit because the intended use made the home a boarding house, rather than a single-family dwelling.” Id. at 45. Further, the “city’s law director also told them the home must satisfy section 153.149 of the city’s zoning code, an ordinance which requires extensive safety protections for family homes housing individuals with developmental disabilities.” Id. Those safety precisions were more “rigorous than the state department’s safety rules for family consortium homes, and are far more extensive than those required of single- family dwellings.” Id. The law director advised them of the following precautions: the provision of “whole-house sprinkler system with alarms, fire retardant wall and floor coverings, lighted exit signs above all doorways, push bars on all doors, fire extinguishers every thirty feet, [and] smoke alarms. Id. at n. 1. Each of the four women to live in the residence was “fully ambulatory, able to hear, and [was] sighted.” Id. plaintiffs were advised that they could petition the City’s Board Zoning of Appeals for a variance from the safety restrictions. Id. at 45. Plaintiffs instead filed suit. Id.

The main issue in the case was Plaintiff’s claim that the ordinance unlawfully discriminated “against developmentally disable persons . . . by imposing onerous safety and permit requirements on single- family residences occupied by developmentally disabled persons, whereas such restrictions are not applied to any other single-family use. . . . Marbrunak . . . must either . . . comply with safety

13 restrictions applicable to licensed “family homes,” . . . or endure the arduous and time-consuming process of seeking a variance from the Board of Zoning Appeals. . . . The options given to Marbrunak by the City require it to choose between incurring needless expense in installing unnecessary safety devices or . . . obtain unnecessary permits and variances before it can open the home. Id. at 46-47.

The district court concluded, which the Court of Appeals affirmed, that “the zoning ordinance as applied to plaintiff violates the FHAA because it imposes safety requirements that are more stringent than safety requirements applied to other single-family residences, and the ordinance makes no effort to tailor the safety requirements to the particular disabilities of plaintiff’s residents.” Id. at 47.

As such, it appears that “conditions” imposed on reasonable accommodations could be permissible and not in violation of the FHAA if they are tailored to the needs of the inhabitants.

B. Refusals to Grant Conditional/Special Use Permits and Variances

Many challenges against municipalities are based on cities’ refusal to grant requesting FHAA plaintiffs a conditional/special use permit or variance from its zoning ordinance. The case law in this area is not clear, but some cases can be helpful in considering the facts that a court might consider when assessing whether a city’s determination is a reasonable accommodation.

For instance, most courts balance the needs of the FHAA plaintiffs in obtaining the permit/variance, with the burdens on the municipality in granting such permit/variance. See Erdman v. City of Fort Atkinson, 84 F.3d 960, 963 (7th Cir. 1996) (“determining whether a requested accommodation is reasonable requires, among other things, balancing the needs of the parties involved” (citing U.S. v. Village of Palatine, 37 F.3d 1230, 1233, 1234 (7th Cir. 1994)); see Hovsons, Inc. v. Township of Brick, 89 F.3d 1096, 1098 (3rd Cir. 1996) (finding no undue financial or administrative burden on the Township and that building the requested nursing home in the sought after zone would not undermine the Township’s zoning scheme); see also Erdman v. City of Fort Atkinson, 84 F.3d 960, 962-63 (7th Cir. 1996); see Judy B. v. Borough of Tioga, 889 F.Supp. 792, 800 (M.D. Pa. 1995) (finding proposed use consistent with character of neighborhood, no fundamental alteration with zoning scheme, and no evidence of any burden on Borough).

Thus, the court in Sanghvi found no failure to reasonably accommodate by the City of Claremont when it refused to provide a sewer hook-up without the generally required annexation based on the fact that Plaintiffs failed to show that the accommodation requested was required by their Alzheimer’s patients. Sanghvi v. City of Claremont, 328 F.3d 532, 538 (9th Cir. 2002). In fact, the concern for the sewer-hook up exception was found to be sought for Plaintiffs’

14 personal economic benefit because they did not want to incur the additional expense of complying with the City’s building requirements rather than for the therapeutic benefit of the patients. Id.

In Brandt, the court found the reasons that the City gave for denying the variance legitimate. Brandt v. Village of Chebanse, 82 F.3d 172, 173 (7th Cir. 1996). Those reasons included: that other triplexes were already on same intersection and concerns about congestions and water runoff. Id. The Court also found that the Village had not created any obstacle to handicapped-accessible housing; that plaintiff could renovate the unit to make it accessible without any variance. Id. at 174.

Similarly, in Parish of Jefferson, the court determined that the concerns articulated by Defendant - increased traffic, demands on drainage and sewerage systems, and economic and aesthetic quality of the neighborhood - were unaffected by plaintiff’s requested accommodations. Parish of Jefferson v. Allied Health Care, Inc., 1992 U.S. Dist. LEXIS 9124, * 18 (E.D. La. 1992).

Finally, at least one court found no reasonable accommodation violation based on the fact that the City tried to work with the FHAA plaintiff to accommodate it, even though the City eventually denied Plaintiff’s request for a special use permit. See Thornton v. City of Allegan, 863 F.Supp. 504, 510 (W.D. Mich. 1993). In this case, the Court found it dispositive that the City had intended to assist plaintiff to locate to another location in the City to accommodate plaintiff’s facility and that the City had already re-zoned plaintiff’s other facility and granted it a special use permit. Id. Thus, the Court determined that obtaining the SUP was not crucial for plaintiff.

C. Challenge to Zoning Ordinance’s Definitional Language

Many FHAA challenges based on failure to reasonably accommodate are to zoning ordinance’s definitions of “family” and/or restrictions on occupancy.

Thus for instance, the District Court in Oxford House, Inc. v. Town of Babylon¸9 held that the Town’s failure to modify its definition of “family” as applied to plaintiff so that the plaintiff could operate its house in the location of its choice was a failure to accommodate. Oxford House, Inc. v. Town of Babylon, 819 F.Supp. 1179, 1185 (E.D.N.Y. 1993). In the case, the at issue home was located in “a residential district in the Town, which is zoned for single family dwellings only.” Id. at 1181. The Town was made aware of this fact through complaints of neighbors about recovering alcoholics living in their community. Id. The Town’s attorney sent a letter to the representatives of Oxford House, informing it that the house was in violation of its municipal code because the residents were not a family, which was defined as “one or more persons related by

9 This case also assessed a claim of disparate impact.

15 blood, marriage, or adoption” or “be a number of unrelated persons, not exceeding four, who are not related by blood, marriage, or adoption. Id. at 1181 and 1181 n. 3. The at issue home housed from five to eight people. Id. at 1181 n. 3. As a result, lawsuits were commenced. Id. at 1181-82.

The court found that the Town was required to modify the definition of “family” to reasonably accommodate plaintiff because it was shown that Oxford House needed that particular location because it was in a residential neighborhood and its residents needed that environment. Id. at 1185. The court also noted that based on the Town’s Code, plaintiffs could not rent a house in any other residential neighborhood. Id. at 1185, n. 10. (indicating that “even if this were not the case, defendant would nevertheless be required to make an accommodation in its Code permitting plaintiffs to occupy this house” relying on section 3604(f)(3)(B) “particular dwelling language” and Oxford House-Evergreen v. Plainfield, 769 F.Supp. 1329, 1344 (D.N.J. 1991)). However, the Court never discussed nor did it appear that the parties considered resort to any kind of zoning procedure, i.e., variance or special use permit so that plaintiff could maintain its property. See id. generally.

Similarly, in City of Edmonds, which was affirmed by the Supreme Court,10 the Ninth Court determined that familial definitions within a zoning ordinance which differentiated between “related” and “non-related” individuals was not exempted under FHAA’s section 3607 (b)(1) exemption for reasonable local, state, or federal restrictions regarding the maximum number of occupants permitted to occupy a dwelling. See City of Edmonds v. Washington State Bldg. Code Council, 18 F.3d 802, 802 (9th Cir. 1994), aff’d by, City of Edmonds v. Oxford House, 514 U.S. 725, 115 S.Ct. 1776, 131 L.Ed. 2d 801 (1995); but see Elliot v. City of Athens, 960 F.2d 975, 975 (11th Cir. 1992) (holding that the FHAA exempts residency restrictions that differentiate between related and unrelated persons). Thus, such definitional distinctions could be subject to FHAA challenged.

In this case, Oxford House, was a residence for recovering adult alcoholics and drug addicts, which needed to have 6 or more residents to ensure financial success. Id. at 803. However, it was located in a neighborhood zoned “single- family residential,” which the City’s zoning ordinance defined a family as, most relevantly, as five or less unrelated individuals living in a dwelling unit but put no cap on the number of individuals living together who were related. Id. [emphasis added] (“Family means an individual or two or more persons related by genetics, adoption, or marriage, or a group of five or fewer persons who are not related by genetics, adoption, or marriage . . . .” ECDC § 21.30.010.). Thus, the City had issued criminal citations to the owner of the Oxford House because it violated the

10 Neither the Supreme Court or the Ninth Circuit determined the substantive question of whether a reasonable accommodation had been made under the FHAA.

16 zoning provision given that it housed more than 5 unrelated persons. Id. Oxford House had requested a reasonable accommodation of being permitted to continue operation in the single-family residential zone. Id. The City denied the request, but, passed an ordinance listing group homes as permitted uses in multi-family and general commercial zones. Id. The Court did not address the substantive FHAA claim of whether the denial, but offering other permitted uses, was a reasonable accommodation.

III. City of San Jacinto Case Study

In 2008, the City of San Jacinto updated its zoning ordinance governing group homes. Prior to 2008, the City’s zoning ordinance used very old definitions that probably no longer met legal scrutiny. In response to the severe housing downturn, the City saw a marked increase in the number of property owners who began renting out multiple rooms in their single-family properties.

The City Council adopted a zoning ordinance, based on a memorandum issued by HUD and DOJ, entitled “Joint Statement on Reasonable Accommodations”. The memorandum states that cities can legally adopt zoning ordinances that do not facially discriminate against disabled persons.11 The City’s ordinance also relied on a California Attorney General opinion, which concluded that California cities could legally restrict the rental of multiple rooms within single-family properties.12 The new ordinance defined a “group home” as a residence where two or more rooms are rented to individuals pursuant to separate lease/rental agreements. It then prohibited such group homes in R-1 zones. Of course, pursuant to California law, the ordinance recognized that licensed care facilities serving 6 or fewer would be exempt from this ordinance.13 So, the ordinance only applied to non-licensed facilities. Further, as part of the staff report presentation to the City Council at the time of the adoption of this new ordinance, the City Council was advised that, notwithstanding the new ordinance’s restrictions, the ADA and FHA would require an exception to the ordinance, in the form of a reasonable accommodation, if the group home were occupied by one or more disabled persons.

After the ordinance was adopted, on November 4, 2008, the City conducted inspections of approximately twelve single-family properties that the City had reason to believe were in violation of the new zoning ordinance. As part of these inspections, the City inspection teams used a set of written questionnaires, to ask the residents and (where present) property owners about the nature of the use of the properties. The questionnaire was originally developed

11 http://www.justice.gov/crt/about/hce/documents/reasonable_modifications_mar08.pdf

12 86 Op.Atty.Gen.Cal. 3 (2003)

13 California Community Care Facilities Act (Cal. Health & Saf. Code, §§ 1500 et seq.)

17 and used by another local city. Among other things, the questionnaires sought to determine whether, in fact, the tenants were “disabled” and thus entitled to “reasonable accommodations” under the Americans with Disabilities Act and Fair Housing Act.

Inspections were conducted by two teams, comprised of code enforcement officers, fire inspectors, peace officers (the City contracts with Riverside County Sheriff’s Dept. for police services), the building official and the city attorney. The sheriff deputies conducted the questioning of the residents and property owners, because of their expertise in conducting investigations and completing thorough incident reports.

During the inspection of one of the homes, the out of town property owner spoke to several of the inspection team members by phone. She stated that she did not want the inspection to occur. The City told her that, since the occupants had expressly consented to the inspection, the inspection would continue.

Between March 21, 2008 and September 29, 2008, the City had received no less than eleven (11) different police service calls regarding this particular property. These complaints included reports of disturbing the peace, reports of person(s) being a danger to himself and others, a burglary call, emergency calls, and requests to support other officers arriving to the scene. Between February 26, 2007 and September 30, 2008, the City received a minimum of twelve (12) different complaints about this property regarding a list of possible code enforcement violations, including trash and debris in the front yard, improper use of trash bins causing trash to not be picked up on a regular basis, a call regarding an unlicensed independent living facility, overcrowding, too many dogs, lack of landscaping and excessively tall weeds. At no time did any of these complaints make any reference to any disability of the residents within the home. During the November 4, 2008 inspection, the City discovered that the house had been converted without building permits, in order to create additional sleeping quarters. Also during the inspection of this particular house, the fire inspector discovered a semi-ambulatory resident who was in bed, among ashtrays and cigarettes.

The investigating deputy concluded that the home was being operated as a unlicensed group home in violation of the City’s recently enacted zoning ordinance. However, the City had previously determined that, if a group home were occupied by disabled persons, the City would grant a reasonable accommodation, providing an exception to the zoning ordinance.

On November 25, 2008, that property owner filed a complaint with HUD, alleging violations of the FHA and ADA. HUD responded by conducting an investigation. The City co-operated fully with HUD, including turning over several binders worth of code enforcement documents. The City also prepared a response brief, explaining the City’s legal position. Once the City became aware of the complaint, the City withheld any sort of code enforcement resulting from

18 the November 2008 inspection. As a result, neither the property owner nor any of the tenants were cited or otherwise prosecuted.

The HUD investigator who was originally assigned to the investigation seemed eager to resolve the investigation by way of a “conciliation” agreement. The City proposed a resolution whereby:

• The city would not pursue any code enforcement action, arising from the November 2008 inspection.

• The property owner would appoint a competent on-site manager.

• The property owner would adopt a list of “house rules” for the tenants.

• The property owner would provide a phone number for the property owner and the house manager, for the City to contact if necessary.

• The property owner would be required to contact the California Department of Social Services, in order to determine whether the facility required licensing, based on the activities occurring at the site.

Ultimately, the property owner rejected these terms. The original investigator was subsequently taken off the case. HUD continued its investigation, with the City constantly inquiring as to the status throughout 2009 and into 2010.

Because the case involved an ordinance adopted by a government agency, in June of 2010, HUD ultimately turned the matter over to the United States Department of Justice. The DoJ continued its investigation into 2011, and in May of 2011, the DoJ conducted interviews of the City Manager, City Attorney, and two Councilmembers (who, by the way, were not on the City Council in 2008 when the ordinance was adopted and the inspection occurred). The City explained to the DoJ that the City never intended the 2008 ordinance to apply to persons with disabilities, and would have granted reasonable accommodations to any persons or providers who requested the same.14 The DoJ requested all of the same documents that the City had previously provided to HUD. DoJ claimed that they or HUD had “lost” many of the documents as part of its transfer of the case. The City provided the requested documents.

14 Neither the owner nor any occupants of the subject property had, to that point, requested a reasonable accommodation.

19 From the outset of the DoJ’s investigation, the lead attorney on the case, Nancy Langworthy indicated that the DoJ’s goal was to seek settlement of the case in a manner that included three primary elements. First, the DoJ wanted to see the 2008 ordinance repealed in its entirety. Second, the DoJ wanted training for City officials/staff. Finally, the DoJ wanted money. Specifically, the DoJ wanted the City to pay the residents of the homes that were inspected, the operators of the homes, and to pay the DoJ.

Two and a half years after the November 2008 inspection, in May of 2011, the owner of the property finally requested a reasonable accommodation from the City, seeking to exempt the property from the City’s zoning ordinance. The City responded by agreeing to the reasonable accommodation, subject to the same conditions previously proposed for the conciliation agreement. The property owner never responded.

In August of 2011, almost three years after the investigation began, HUD concluded that the City had not complied with the FHA. The City made a formal Freedom of Information Act request, in December of 2011, seeking backup information regarding HUD’s investigation. After delaying well beyond the statutory 20 day response period, HUD rejected the City’s FOIA request. The City never received any information other than HUD’s letter of non-compliance.

Throughout 2010, 2011, and into 2012, the DoJ continued its investigation. In June of 2012, the DoJ sought a tolling agreement with the City. The City agreed to the tolling agreement, but made it clear to the DoJ that the City needed more information with regard to the specific terms of any settlement that the DoJ would seek. Toward the expiration of that tolling agreement in September of 2012, the DoJ still had not provided the City with any more specifics. Nevertheless, the City granted an extension of the tolling agreement, until November 9, 2012. At that time, the City notified the DoJ in writing that the City would not grant any further extensions unless the DoJ provided the City with more specifics regarding any settlement terms. Of course, the DoJ did not provide the requested specifics, and the extended tolling agreement expired.

Over four years after the inspections occurred, on November 9, 2012, the DoJ filed suit against the City of San Jacinto. Almost immediately thereafter, several private plaintiffs (both property owners and residents) filed suit against the City. The attorney for these private plaintiffs is the same attorney who is the lead attorney in the Newport Beach case15 and a recent case filed against the City of Riverside.16

15 In Pacific Shores v. City of Newport Beach, ((Sept. 20, 2013) 730 F.3d 1142.), the Ninth Circuit held that where there is direct or circumstantial evidence of discriminatory intent toward a protected class and has caused harm to members of that protected class, such evidence is sufficient to permit the protected individuals to proceed with trial under a disparate impact theory.

20 Although the plaintiffs challenged the 2008 ordinance, the DoJ’s attorney seemed most aggrieved by the fact that the City, which contracts with the County for police services, used uniformed officers to participate in the property inspections.

Even before the lawsuit was filed, the City realized that the DoJ was not interested in trying the case. Instead, the DoJ’s modus operandi is to file suit and settle the case, so that it can publicize its settlements on the DoJ’s website.17

Over the course of 2013, the City engaged in discovery, since HUD and the DoJ never provided any evidence of the alleged harm during the course of the pre-suit negotiations. This involved the depositions of several of the operators and occupants. These depositions resulted in the discovery of facts that ultimately reduced the amount of the alleged damages sought by the plaintiffs and aggrieved persons significantly.

For instance, one of the operators lost her rental property not because of the City’s inspections, as originally alleged. Instead, she lost the property to foreclosure, since she was told by her lending bank that the only way to modify her loan was to stop making payments. She fell behind and the property ultimately went into foreclosure.

Another aggrieved party, a tenant in the home that spawned the HUD complaint, testified that the City’s 2008 inspection didn’t really bother him that much, and that he was suffering more from the unruly residents that he shared the house with.

In June of 2014, the City settled the case for significantly less than what the DoJ and private plaintiffs initially requested. Rather than repealing the 2008 ordinance entirely, as the DoJ had requested all along, the City continues to prohibit the rental of multiple rooms in single family zones. However, there is now a specific definition for group homes service the disabled, and those home are permitted in any zone within the City.

Rehearing, en banc, was denied, and the City filed its writ of certiorari with the U.S. Supreme Court on July 17, 2014.

16 Fair Housing Council v. City of Riverside, U.S. Dist. Ct. Case No. 5:14-cv-01391-JGB-SP (filed July 11, 2014) , involves the City of Riverside’s recent ordinance regulating the rental of multiple rooms.

17 http://www.justice.gov/crt/about/hce/whatnew.php

This page left intentionally blank.

Responding to Federal Fair Housing Investigations: When the DOJ Comes Calling

Wednesday, September 3, 2014 General Session; 1:00 – 2:45 p.m.

Toussaint S. Bailey, Richards, Watson & Gershon

23 Notes:______

RESPONDING TO FEDERAL FAIR HOUSING INVESTIGATIONS: WHEN THE DOJ COMES CALLING

Toussaint S. Bailey Richards | Watson | Gershon

In loving memory of my colleague, mentor, and dear friend Steven R. Orr (Nov. 3, 1962 - July 2, 2014). Neither this paper nor my professional development would have been possible without Steve’s invaluable contributions.

25 I also gratefully acknowledge the insights and assistance provided by my colleague Julie A. Hamill. I. INTRODUCTION For even the most unflappable municipal lawyer, the thought of a client being investigated for violations of the federal Fair Housing Act by the United States Department of Justice (“DOJ”)—a department of the federal government that describes itself as “the world’s largest law office” and happens to oversee the Federal Bureau of Investigations—can give rise to uncharacteristic levels of anxiety. This paper aims to demystify DOJ investigations under the federal Fair Housing Act and highlight some of the issues municipalities might face in responding to such investigations.1 The discussion that follows (1) provides a short background on DOJ’s enforcement of federal law; (2) explains DOJ’s role in enforcing the Fair Housing Act; and, finally, (3) describes DOJ’s primary areas of focus in investigations of alleged Fair Housing Act violations by municipalities. The discussion is followed by two short practical sections: the first provides insight into how a typical investigation might proceed and the second provides a few general tips for dealing with investigations. II. DISCUSSION A. Background on DOJ Enforcement of Federal Law Since the Enforcement Act of 1870 established DOJ as an executive department of the United States government, the Attorney General has presided over the central department for enforcement of federal laws.2 DOJ is comprised of 40 components, which cover a variety of responsibilities.3 Enforcement of civil rights is one of DOJ’s chief responsibilities. DOJ’s Civil

1 For purposes of brevity and analytical efficiency, this paper does not endeavor to provide a comprehensive analysis of the federal Fair Housing Act of 1968 and the Fair Housing Amendments Act of 1988 (collectively herein, “Fair Housing Act”), 42 U.S.C. 3601 et seq. See Schwemm, Housing Discrimination Law and Litigation, (West 2014), for an in depth analysis of federal housing discrimination law. 2 http://www.justice.gov/crt/. 3 http://www.justice.gov/jmd/2011summary/pdf/overview.pdf.

26 Rights Division, created by the enactment of the Civil Rights Act of 1957,4 enforces federal statutes prohibiting discrimination on the basis of race, color, sex, disability, religion, familial status and national origin, including the Fair Housing Act, the Civil Rights Acts; the Voting Rights Act; the Equal Credit Opportunity Act; the Americans with Disabilities Act; the National Voter Registration Act; the Uniformed and Overseas Citizens Absentee Voting Act; the Voting Accessibility for the Elderly and Handicapped Act; and additional civil rights provisions contained in other laws and regulations.5 The work of DOJ’s Civil Rights Division is carried out by its 11 sections.6 The Housing and Civil Enforcement Section is charged with enforcing the Fair Housing Act.7 B. DOJ’s Role in Fair Housing Act Enforcement 1. Fair Housing Act Enforcement Overview The thrust of the Fair Housing Act is found in the provisions making it unlawful to deny, or otherwise make unavailable, a dwelling because of race, color, religion, sex, familial status, national origin, or disability.8 In Trafficante v. Metropolitan Life Ins. Co., the United States Supreme Court observed that the language of the Fair Housing Act is “broad and inclusive”9 and found that it carries out a “policy that Congress considered to be of the highest priority.”10 The Trafficante Court concluded that vitality can be given to this policy “only by a generous construction” of the statute.11

4 71 Stat. 634 (1957). 5 http://www.justice.gov/crt/about/; http://www.justice.gov/agencies/index-list.html. 6 http://www.justice.gov/crt/about/. 7 Id. 8 42 U.S.C. § 3604(a); 42 U.S.C. § 3604(f)(1), extending protection to persons with disabilities under the Fair Housing Amendments Act; see also 42 U.S.C. § 3604(b), (f)(2), and § 3605; but see 42 U.S.C. § 3604(f)(3), identifying certain types of behavior as illegal discrimination based on disability and requiring only a showing that the defendant “refused” or “failed” to take certain prescribed action. 9 409 U.S. 205, 211-12 (1972). 10 409 U.S. at 211-12. 11 409 U.S. at 212; see also City of Edmonds v. Oxford House, Inc., 514 U.S. 725 (1995) (reaffirming the propriety of “generous construction” of the Fair Housing Act).

27 Although the Trafficante Court was addressing private party standing issues, its principle of “generous construction” has been more broadly applied by parties seeking to enforce the Fair Housing Act’s substantive provisions, as well as lower courts interpreting the Act. Although most of the Fair Housing Act’s substantive provisions ban discrimination “because of” race, color, national origin, religion, sex, handicap, or familial status,12 California federal district courts and the Ninth Circuit have almost uniformly recognized Fair Housing Act liability for not only discriminatory intent, but also based on discriminatory effects of facially neutral laws or practices.13 Last year, the United States Department of Housing and Urban Development (“HUD”) adopted regulations formalizing the federal government’s long-held view that the Fair Housing Act encompasses discriminatory effects liability.14 The United States Supreme Court has twice within last three years agreed to resolve whether a claim based solely on discriminatory effects, or “disparate impact,” is cognizable under the Fair Housing Act. However, both cases were withdrawn before the justices could rule.15 In May, the question was presented to the Court in yet another Petition for a Writ of Certiorari in Inclusive Communities Project v. Texas Dep’t of Housing.16 Notwithstanding the petition pending before the Court, municipalities should not expect DOJ to cease relying on the

12 See 42 U.S.C. §§ 3604(a), (b), (d), (f)(1), (f)(2), and § 3605. 13 See, e.g., Ojo v. Farmers Group, Inc., 600 F.3d 1205, 1207 (9th Cir. 2010), as amended, (Apr. 30, 2010) and amended, 2010 WL 1729742 (9th Cir. 2010) (en banc); Budnick v. Town of Carefree, 518 F.3d 1109, 1118 (to establish a prima facie case a “plaintiff need not establish discriminatory intent but the discriminatory impact must be proven; an inference of discriminatory impact is not sufficient”). 14 See 78 Fed. Reg. 11482 (promulgating 24 C.F.R. § 100.500 (“Discriminatory effect prohibited”)) (Feb. 15, 2013). 15 Twp. of Mount Holly, N.J. v. Mt. Holly Gardens Citizens in Action, Inc., cert. granted, 133 S.Ct. 2824 (2013) and cert. dismissed 134 S.Ct. 636 (2013); Magner v. Gallagher, cert. granted, 132 S. Ct. 548 (2011) and cert. dismissed, 132 S. Ct. 1306 (2012). 16 Docket No. 13–1371 (May 13, 2014).

28 disparate impact theory of liability in Fair Housing Act investigations and settlement negotiations.17

2. DOJ’s Enforcement of the Fair Housing Act The Fair Housing Act authorizes enforcement of its substantive provisions by essentially three mechanisms: (1) private party complaints to HUD18; (2) private party lawsuits19; and (3) lawsuits by the United States Department of Justice (“DOJ”)20. Although this paper focuses on the third method of enforcement, the three methods, as a general rule, are not exclusive of one another. Thus, a defendant who violated one of the Fair Housing Act’s substantive provisions could be subject to a lawsuit by DOJ, even if that defendant is also the subject of a complaint to HUD and a defendant to a private court action.21 DOJ does not involve itself in every violation of the Fair Housing Act. Violations of the Fair Housing Act’s substantive provisions must be of a particular nature or severity to trigger DOJ’s enforcement authority. 42 U.S.C. § 3614(a) authorizes DOJ to initiate its own lawsuits in response to significant Fair Housing Act violations; 42 U.S.C. § 3614(b) authorizes DOJ to file suit in certain types of cases referred to DOJ from HUD; and 42 U.S.C. § 3614(c) authorizes

17 See “DOJ’s Quid Pro Quo with St. Paul: How Assistant Attorney General Thomas Perez Manipulated the Rule of Law,” Joint Staff Report, United States Congress (April 15, 2013) (discussing DOJ’s role in withdrawal of Magner v. Gallagher). 18 42 U.S.C. §§ 3610-3612. 19 42 U.S.C. § 3613. 20 42 U.S.C. § 3614. 21 See Mitchell v. Cellone, 389 F.3d 86 (3d Cir. 2004) (filing of HUD complaint does not constitute a private party’s election of remedies); U.S. v. Starrett City Associates, 605 F. Supp. 262 (E.D. N.Y. 1985) (DOJ’s failure to intervene in a private suit will not estop DOJ from bringing its own subsequent action against the same defendant under 42 U.S.C. § 3614); Huntington Branch, N.A.A.C.P. v. Town of Huntington, N.Y., 689 F.2d 391, 394 n.3 (2d Cir. 1982) (recognizing private party’s right to proceed directly to court with Fair Housing Act lawsuit without first pursuing a HUD complaint). But see 42 U.S.C. § 3613(a) (imposing restrictions on dual private lawsuits and HUD complaints).

29 DOJ to enforce subpoenas issued in HUD administrative proceedings in the United States district court.22

a. DOJ initiated lawsuits Under 42 U.S.C. § 3614(a) DOJ, may initiate a civil action if there is: “…reasonable cause to believe that any person or group of persons is engaged in a pattern or practice of resistance to the full enjoyment of any of the rights granted by this title, or any group of persons has been denied any rights granted by this title and such denial raises an issue of general public importance…” (Emphasis added.) i. “Pattern or practice” cases The United States Supreme Court has interpreted “pattern or practice,” in the employment context, to mean “more than a mere occurrence of isolated or ‘accidental’ or sporadic discriminatory acts.” 23 A pattern or practice of employment discrimination requires proof, by a preponderance of the evidence, that the discrimination is “standard operating procedure – the regular rather than the unusual practice.”24 Lower courts have applied a similar definition of “pattern or practice” in Fair Housing Act cases.25

22 See also 42 U.S.C. § 3613(e) (DOJ is authorized to intervene and seek appropriate relief in private party lawsuits if the Attorney General certifies that the case is “of general public importance”). 23 International Brotherhood of Teamsters v. United States, 431 U.S. 324, 336 (1977). 24 Id. 25 See United States v. West Peachtree Tenth Corporation, 437 F.2d 221, 269 (5th Cir. 1971) (stating pattern or practice requirement was “intended to encompass more than an ‘isolated or accidental or peculiar event.”); Schwemm, Housing Discrimination Law and Litigation, § 26:3 (West 2014).

30 Among other things, a discriminatory statute, ordinance, or municipal policy may qualify as a “pattern or practice” under 42 U.S.C. § 3614(a).26 Neither willful nor even intentional discrimination need be shown to establish a pattern or practice.27 Each case examining the pattern or practice issue must be decided on its own facts.28 ii. “General importance” cases The DOJ can also proceed under 42 U.S.C. § 3614(a) by showing that a group of persons has been denied rights granted by the Fair Housing Act and that such denial raises an issue of “general public importance.”29 To prevail in a “general public importance” case, DOJ must prove that the defendant’s discriminatory conduct affected more than a single individual.30 However, the group of persons affected need not be subjected to the type of “pattern or practice” of discrimination discussed; even an isolated discriminatory act is sufficient to justify relief.31 The group of persons has typically been a protected class of home seekers, but municipalities have been subject to “general public importance” lawsuits on behalf of other groups, such as current residents of an apartment complex or neighborhood that has been kept illegally segregated by the defendant.32

26 See, e.g. United States v. City of Black Jack, Missouri, 508 F.2d 1179 (8th Cir. 1974); United States v. Parma, Ohio, 494 F. Supp. 1049, 1095 (N.D. Ohio 1980); see also United States v. Housing Authority of City of Chickasaw, 504 F. Supp. 716, 727 (S.D. Ala. 1980) (“When, as here, a [housing authority’s] policy of regular application is itself alleged to be discriminatory, the pattern or practice requirement is satisfied.”). 27 See United States v. Security Management Co., Inc., 96 F.3d 260, 269 (7th Cir. 1996); United States v. Quality Built Construction, Inc., 309 F.Supp.2d 756, 760 (E.D. N.C. 2003). 28 See West Peachtree, supra, 437 F.2d at 227. 29 See Schwemm, Housing Discrimination Law and Litigation, § 26:4 (West 2014). 30 U.S. v. City of Parma, Ohio, 494 F. Supp. 1049, 1095 (N.D. Ohio 1980), judgment aff’d, 661 F.2d 562 (6th Cir. 1981). 31 Id. at 1095; U.S. v. Hunter, 459 F.2d 205, 217–18, 22 A.L.R. Fed. 339 (4th Cir. 1972); see also U.S. v. Taigen & Sons, Inc., 303 F. Supp. 2d 1129, 1139 (D. Idaho 2003) (holding, even if defendants’ actions in violating the Fair Housing Act “do not amount to a ‘pattern or practice’ of discrimination, they can nevertheless be liable for Fair Housing Act violations under the general public importance prong of § 3614(a)”). 32 U.S. v. City of Parma, Ohio, 494 F. Supp. 1049, 1096 (N.D. Ohio 1980), judgment aff’d, 661 F.2d 562 (6th Cir. 1981). See generally Gladstone Realtors v. Village of Bellwood, 441 U.S. 91,

31 The denial of rights must raise “an issue of general public importance,” but what constitutes an issue of general public importance is a DOJ determination courts have generally declined to review.33 b. DOJ lawsuits based on HUD Referrals In addition to DOJ’s authority to initiate lawsuits discussed above,34 42 U.S.C. § 3614(b) authorizes DOJ to bring a civil action in two types of cases that grow out of administrative complaints to HUD under 42 U.S.C. § 3610 that are subsequently referred to DOJ by HUD.35 In both situations, the statute provides that DOJ “may commence a civil action,”36 which means that DOJ has the same type of prosecutorial discretion with respect to these HUD-referred cases that it does with “pattern or practice” and “general public importance” cases under 42 U.S.C. § 3614(a). i. HUD complaints regarding local land use laws The first type of referral under 42 U.S.C. § 3614(b) requires that HUD refer to DOJ all administrative complaints under 42 U.S.C. § 3610 involving “the legality of any State or local zoning or other land use law or ordinance.”37 If HUD determines that an administrative complaint raised such a legal issue, HUD may not issue a charge but instead must “immediately refer the matter to the Attorney General for appropriate action under [42 U.S.C. § 3614(b)(1)].”38 The determination that a HUD complaint falls within this category is to be made by HUD’s

99 S. Ct. 1601, 60 L. Ed. 2d 66 (1979); Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 93 S. Ct. 364, 34 L. Ed. 2d 415 (1972). 33 See, e.g., U.S. v. Northside Realty Associates, Inc. 474 F.2d 1164, 1168 (5th Cir. 1973); U.S. v. Yonkers Bd. of Educ., 624 F. Supp. 1276, 1291 n.9 (S.D. N.Y. 1985), judgment aff’d, 837 F.2d 1181 (2d Cir. 1987); U.S. v. City of Parma, Ohio, 494 F. Supp. 1049, 1095 n.64 (N.D. Ohio 1980), judgment aff’d, 661 F.2d 562 (6th Cir. 1981). 34 Section II.B.2.a, supra. 35 Schwemm, Housing Discrimination Law and Litigation, § 26:11 (West 2014) 36 42 U.S.C. § 3614(b)(1)(A), (2)(A). 37 42 U.S.C. § 3614(b)(1)(A), § 3610(g)(2)(C). 38 42 U.S.C. § 3610(g)(2)(C); see, e.g., U.S. v. City of Hayward, 36 F.3d 832, 835 (9th Cir. 1994).

32 Assistant Secretary for Fair Housing and Equal Opportunity.39 This determination may not occur until after HUD has completed its investigation of the complaint.40 Once the case is referred to DOJ, it may commence a civil action challenging the discriminatory land-use law.41 DOJ’s suit must be brought, if at all, not later than eighteen months after the occurrence or the termination of the alleged discriminatory housing practice.42 Note, this authority is in addition to DOJ’s authority to challenge exclusionary land-use laws in “pattern or practice” and “general public importance” cases under 42 U.S.C. § 3614(a). DOJ’s authority to act under one of these provisions is independent of its authority to act under the other.43 It follows that DOJ need not wait for a HUD-referral to challenge an exclusionary zoning law that involves a pattern or practice of discrimination or raises an issue of general public importance under § 3614(a), and, on the other hand, DOJ may bring a HUD-referred case under § 3614(b) even if it would not be important enough to qualify for a § 3614(a) action.44 The Fair Housing Act specifically authorizes courts to invalidate any state or local law that would require or permit any action that would constitute a discriminatory housing practice under the Act.45 ii. Enforcement of conciliation agreements The second is a referral prompted by the breach of a conciliation agreement under 42 U.S.C. § 3610(c). “Whenever [HUD] has reasonable cause to believe that a respondent has breached a conciliation agreement, [HUD] shall refer the matter to [DOJ] with a

39 24 C.F.R. § 103.400(a)(3), as amended by 59 Fed. Reg. 39956 (Aug. 5, 1994). 40 See 24 C.F.R. Part 103. 41 42 U.S.C. § 3614(b)(1)(A). 42 42 U.S.C. § 3614(b)(1)(B). 43 Schwemm, Housing Discrimination Law and Litigation, § 26:12 (West 2014). 44 Id. 45 42 U.S.C. § 3615; Astralis Condominium Ass’n v. Secretary, U.S. Dept. of Housing and Urban Development, 620 F.3d 62, 70 (1st Cir. 2010) (the Fair Housing Act “manifests a clear congressional intent to vitiate the application of any state law that would permit discrimination”).

33 recommendation that a civil action be filed under [42 U.S.C. §] 3614” to enforce the agreement.46 DOJ’s suit must be filed within 90 days after the HUD referral, if at all.47 c. DOJ enforcement of HUD administrative subpoenas The Fair Housing Act authorizes HUD to issue subpoenas in aid of its investigations and administrative proceedings under 42 U.S.C. §§ 3610 to 3612.48 Subpoenas may be issued on behalf of HUD itself or on behalf of any party to a HUD proceeding.49 The statute provides that subpoenas may be ordered to the same extent and subject to the same limitations as would apply in the federal district court where the investigation is taking place.50 42 U.S.C. § 3614(c) authorizes DOJ to bring a proceeding in the United States district court to enforce a Fair Housing Act subpoena on behalf of HUD or the party at whose request the subpoena was issued. C. DOJ Fair Housing Act Investigations 1. DOJ Fair Housing Act Investigation Triggers Courts have opined that the “pattern or practice” and “general importance” requirements under 42 U.S.C. § 3614(a) show that Congress did not intend DOJ to enforce private rights provided by the Fair Housing Act “unless a specific violation has a measurable public impact.”51 If neither a pattern or practice nor a group violation that raises an issue of general public importance is shown, the defendant is entitled to judgment in a § 3614(a) case.52 Unfortunately, this limitation does not offer much help to a municipality at the investigation stage of a DOJ enforcement action under the Fair Housing Act. Although the courts do have responsibility for deciding the ultimate question of whether a pattern or practice of resistance or a group denial raising an issue of general public importance has been shown, DOJ need only have “reasonable cause to believe” such circumstances exist to

46 42 U.S.C. § 3610(c). 47 42 U.S.C. § 3614(b)(2)(B). 48 42 U.S.C. § 3611(a). 49 42 U.S.C. § 3611(a); 24 C.F.R. § 180.545. 50 42 U.S.C. § 3611(a) 51 U.S. v. Hunter, 459 F.2d 205, 217 (4th Cir. 1972). 52 Id.; see also U.S. v. University Oaks Civic Club, 653 F. Supp. 1469, 1476 (S.D. Tex. 1987).

34 file a lawsuit under 42 U.S.C. § 3614(a). DOJ’s “reasonable cause” determination is not reviewable by the courts.53 Moreover, where HUD has referred a case involving legality of a local land use law or a breached conciliation agreement, DOJ’s enforcement authority under 42 U.S.C. § 3614(b) is clear. If DOJ has broad discretion with respect to filing decisions, it has complete discretion over the decision to investigate a municipality for Fair Housing Act violations. It is difficult to determine, with certainty, precisely what triggers a particular DOJ investigation. HUD administrative complaints under 42 U.S.C. § 3610 and private party lawsuits under 42 U.S.C. § 3613 seem to be the most likely causes for DOJ investigations, but investigations might be triggered by a number of other activities or events, such as a media reports, statements or actions made by City representatives (even outside of their official capacities), statements or actions of community residents, and, perhaps, even a municipality’s reputation. 2. Likely Focus of a DOJ Fair Housing Act Investigation By the time DOJ notifies a municipality that it is under investigation for Fair Housing Act violations, DOJ may have already formed strong opinions about the municipality’s culpability. In practice, DOJ’s Fair Housing Act investigations seem to be more about proving violations than trying to ascertain whether a violation has occurred. Thus, DOJ will likely focus on evidence to make out a claim under the Fair Housing Act; not exculpatory evidence or mitigating circumstances. Given that direct evidence of local officials’ animus against a protected class is rarely available,54 DOJ will not limit its examination to statements by a municipality’s decision-makers.

53 E.g., U.S. v. City of Philadelphia, Pa., 838 F. Supp. 223, 227–28, aff’d, 30 F.3d 1488 (3d Cir. 1994); U.S. v. Housing Authority of City of Chickasaw, 504 F. Supp. 716, 726 (S.D. Ala. 1980); U.S. v. City of Parma, Ohio, 494 F. Supp. 1049, 1095 n.64 (N.D. Ohio 1980), judgment aff’d, 661 F.2d 562 (6th Cir. 1981); see also U.S. v. Bahr, 856 F. Supp. 2d 1225, 1229 (M.D. Ala. 2012) (“For jurisdictional purposes, the statute does not require actual proof of the pattern or practice of discrimination; the Attorney General need only [have] ‘reasonable cause’ to believe that it occurred.”). 54 See, e.g., Atkins v. Robinson, 545 F. Supp. 852, 870 (E.D. Va. 1982), judgment aff'd, 733 F.2d 318 (4th Cir. 1984); Smith v. Town of Clarkton, N. C., 682 F.2d 1055, 1064–65 (4th Cir. 1982);

35 With respect to claims based on discriminatory intent, DOJ will look to sources of proof similar to those relied on in the context of equal protection claims.55 The areas of examination may include:

- the discriminatory effect of the defendant’s action; - the historical background of the decision; - the specific sequence of events leading up to the decision; - departures from the normal procedural sequence; - departures from the normal substantive criteria; and - the legislative and administrative history of the decision.56 A particularly disconcerting area of inquiry in DOJ Fair Housing Act investigations is the desires of bigoted private citizens. Such private citizen desires have been relied on as circumstantial evidence of discriminatory intent on the part of municipal decision-makers. In United States v. City of Birmingham, Michigan, the district court, siding with DOJ, held: In order to demonstrate a city's racially discriminatory intent, it is sufficient to show that the decision-making body acted for the sole purpose of effectuating the desires of private citizens, that racial considerations were a motivating factor

Metropolitan Housing Development Corp. v. Village of Arlington Heights, 558 F.2d 1283, 1290 (7th Cir. 1977). 55 See Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 264–71 (1977) (articulating equal protection standard); see also Schwemm, Housing Discrimination Law and Litigation, § 13:12 (West 2014) (“Fair Housing Act cases have adopted the same standards that govern an equal protection claim as set forth by the Supreme Court in Village of Arlington Heights v. Metropolitan Housing Development Corp.”). 56 429 U.S. at 266–68. Examples of Fair Housing Act cases following Arlington Heights include U.S. v. Yonkers Bd. of Educ., 837 F.2d 1181, 1216–17 (2d Cir. 1987); U.S. v. City of Birmingham, Mich., 727 F.2d 560, 565 (6th Cir. 1984); Greater New Orleans Fair Housing Action Center v. St. Bernard Parish, 648 F. Supp. 2d 805, 809-19 (E.D. La. 2009); Atkins v. Robinson, 545 F. Supp. 852, 870–71 (E.D. Va. 1982), judgment aff'd, 733 F.2d 318 (4th Cir. 1984); In re Malone, 592 F. Supp. 1135, 1166 (E.D. Mo. 1984), judgment aff'd, 794 F.2d 680 (8th Cir. 1986).

36 behind those desires, and that members of the decision-making body were aware of the motivations of the private citizens.57 DOJ might also try to make out a discriminatory effects claim by collecting statistical proof to show a municipal practice either (1) actually or predictably results in a disparate impact on a protected class or (2) perpetuates segregated housing patterns along lines of race or other protected characteristics.58 The key to each of these theories is statistical proof of effects rather than a decision-makers’ intent.

III. WHAT TO EXPECT DURING THE INVESTIGATION

 Expect to be treated like a suspect As noted above, the aim of DOJ Fair Housing Act investigations seems to be finding facts to prove a violation. A municipality should not expect that facts supporting potential defenses or mitigating circumstances will persuade DOJ to walk away from its investigation.

 Expect broad information requests, even in the absence of subpoenas Even without the force of an administrative subpoena or civil subpoena,59 DOJ will likely request (i.e., demand) a wide range documents and electronically stored information potentially relevant to a Fair Housing Act claim. Do not expect DOJ to limit its requests to public records municipalities are obligated to produce.

 Do NOT expect DOJ to consider city officials “off limits”

57 U.S. v. City of Birmingham, Mich., 538 F. Supp. 819, 828 (E.D. Mich. 1982), aff’d as modified, 727 F.2d 560 (6th Cir. 1984). 58 24 C.F.R. 100.500(a). 59 Note, HUD may issue subpoenas in the context of administrative actions under 42 U.S.C. § 3610 and DOJ is charged with enforcing such subpoenas pursuant to 42 U.S.C. § 3614(c), but the Fair Housing Act does not provide DOJ independent authority to issue subpoenas absent an administrative proceeding under 42 U.S.C. § 3610 or litigation under 42 U.S.C. § 3614.

37 DOJ will likely request to interview decision-makers and will likely cover a wide range of topics in such interviews. As noted above, direct evidence of discriminatory intent is rarely available. Thus, interviews may attempt to delve into circumstantial evidence of intent, such as community opposition, past decisions and changes in position, findings supporting of a decision, and events and actions surrounding a decision.

 Do NOT expect reciprocity in the exchange of information Because a DOJ Fair Housing Act investigation occurs prior to litigation, a municipality will not have tools of discovery or subpoena at its disposal. DOJ is not likely to volunteer information regarding its legal theories or the supporting factual basis. Such information will need to be obtained in the context of settlement negotiations and, perhaps, only if DOJ receives something in return.

 Expect request(s) for tolling agreement(s) Although some DOJ claims under 42 U.S.C. § 3614 have relatively short limitations periods,60 DOJ will likely request a tolling agreement and extensions while it conducts its investigation.

 Expect informal contact Much of a DOJ Fair Housing Act investigation will likely be conducted by informal contact from the Assistant United States Attorney(s) responsible for the case. Do not expect an outline of a formal process or significant written information from DOJ during over the course of the investigation.

 Expect attempts to resolve the investigation by consent decree

60 For example, under 42 U.S.C. § 3614(b), DOJ must file action based on HUD-referred land use cases within eighteen months of the alleged discriminatory housing practice and DOJ must file action based upon breach of a conciliation agreement within 90 days of its referral from HUD. However, where civil penalties are sought, the five-year statute of limitations contained in 28 U.S.C. § 2462 seems to control and monetary claims where the DOJ is suing in a representative capacity for the benefit of private individuals appear to be governed by the three- year limitations period provided in 28 U.S.C. § 2415(b).

38 Consent decrees appear to be DOJ’s tool of choice for resolving Fair Housing Act claims, whether after judgment or in the connection with a negotiated settlement.61 IV. A FEW PRACTICAL TIPS FOR SURVIVING INVESTIGATIONS

 Immediately begin collecting and organizing all potentially relevant evidence At the investigation stage, attorneys and clients should marshal all facts and evidence potentially relevant to any legal theory DOJ might raise. There are times when a municipality may wish to focus its resources on challenging DOJ’s overarching legal positions (such as DOJ’s reliance on discriminatory effect theories to support claims under the Fair Housing Act), but fact collection at the investigation stage should be all encompassing. Proving and disproving discriminatory effect theories can be particularly time consuming and complex because such theories tend to involve broad demographic information and statistical analysis. Clients will be well-served by addressing facts related discriminatory effect theories before an investigation becomes litigation.

 Prepare litigation hold letters concerning the investigation and continue to confirm compliance Since DOJ Fair Housing Act investigations tend to be about finding evidence to support an alleged violations rather than determining whether violations have occurred,62 notice of the investigation may, in itself, be sufficient to trigger a duty to preserve evidence.63

 Request information from DOJ, repeatedly if necessary DOJ is not legally obligated, at the investigation stage, to share information with a municipality the basis for a Fair Housing Act investigation or what facts the investigation has yielded. Still, this should not stop the municipality from requesting information about the

61 See “Recent Accomplishments of the Housing and Civil Enforcement Section” (updated June 3, 2014), available at http://www.justice.gov/crt/about/hce/whatnew.php. 62 Section III, infra, “Expect to be treated like a suspect.” 63 In re Napster, Inc. Copyright Litig., 462 F.Supp.2d 1060, 1067 (N.D. Cal. 2006) (“a litigant is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action”). Apple Inc. v. Samsung Electronics Co., Ltd., 881 F.Supp.2d 1132, 1136 (N.D. Cal. 2012) (The duty attaches “from the moment that litigation is reasonably anticipated”).

39 investigation. Despite any protestations to the contrary, DOJ generally seems motivated to settle rather than litigate Fair Housing Act cases.64 When requesting information about the investigation, remind DOJ that city staff and officials need investigation information to appropriately analyze, and make informed decisions about, potential settlement terms.

 Prepare city staff and officials for press inquires and public comments The record for Fair Housing Act litigation is created, in large part, during DOJ’s investigation. Because direct evidence of discriminatory intent is rarely available, DOJ will rely heavily on circumstantial evidence. City staff and officials should expect that any press statements or public comments made by them or attributed to them will be scrutinized by DOJ and potentially used as evidence of discrimination.65 Discriminatory admissions and other incriminating statements made by a defendant’s agent are attributable to the principal.66

 Notify insurers or joint powers authorities of potential claim and examine availability of coverage DOJ often seeks significant monetary penalties in Fair Housing Act settlements. It is wise to notify insurers and begin exploring the availability of insurance coverage for potential Fair Housing Act violations well before DOJ completes its investigation. Complex coverage issues can arise, particularly where there are “pattern and practice” allegations spanning several years and touching on a variety of municipal functions.

 Carefully consider the costs of litigation, including attorneys fees and appeals Although damage awards in the housing discrimination field have generally been quite modest, a client can incur significant cost from its own attorneys’ trial preparation and from the plaintiff’s fees in the event of a loss. Ironically, many defendants have been badly served by

64 http://www.justice.gov/crt/about/hce/whatnew.php 65 See, e.g., U.S. v. Big D Enterprises, Inc., 184 F.3d 924, 930 (8th Cir. 1999); Thronson v. Meisels, 800 F.2d 136, 142 (7th Cir. 1986). 66 See, e.g., Hobson v. HSC Real Estate, Inc., 483 Fed. Appx. 332, 333 (9th Cir. 2012); cf. Daniels v. Brooklyn Estates & Properties Realty, 413 Fed. Appx. 399, 401 (2d Cir. 2011) (discriminatory statement by one defendant’s employee was not admissible against another defendant because this employee was not shown to be an agent of the second defendant).

40 winning the case at the trial court level on a questionable ground, because a successful appeal by the plaintiff eventually comes to be paid for by the defendant. Settlement should be carefully considered at the investigation stage.67

 Tell your story to an influential audience The DOJ attorneys leading an investigation might not have authority to settle a case or a complete understanding of all the factors driving the decision to undertake the investigation. Municipal attorneys and their clients should do everything in their power to get an audience with an ultimate decision maker at the DOJ.

 Support fair housing

67 See Schwemm, Housing Discrimination Law and Litigation, § 33:13 (West 2014).

This page left intentionally blank.

Creating and Operating Nonprofit Organizations

Wednesday, September 3, 2014 General Session; 1:00 – 2:45 p.m.

Shahiedah S. Coates, Jenkins & Hogin

43 Notes:______

44 Supplementing Public Services with Nonprofit Corporations:

A Survey of Key Legal Issues

Shahiedah S. Coates1

Introduction

Public services are often provided or supported by nonprofit corporations, a trend on the upswing. These partnerships take many forms. A municipality may create a nonprofit and delegate to it authority to perform government services and activities, enter into a collaborative relationship with a nonprofit with a close community connection to inform governmental policy development, or retain a nonprofit corporation to perform services as a contractor or coordinated service provider. Cities may provide grants to nonprofit corporations, may pay for products and services received, or may receive funds raised by nonprofits such as “friends of” parks, libraries and zoos.

Recent phenomena, such as economic recessions, the State of California’s “realignment” shift of responsibility of various programs to local governments, and restrictions on the ability of local governments to raise revenue, force cities to “do more with less.” Cities may find that creating or partnering with nonprofit corporations allows them to do just that. For instance, nonprofit corporations may be created to maintain a city landmark (such as the Lomita Railroad Museum Foundation and the Angels Flight Railway Foundation), provide financial support and/or management of public spaces (such as parks, libraries or zoos), or serve as a conduit for grants of government funds to other nonprofit corporations (such as the Harbor Community Benefit Foundation). Just as many cities outsource legal, law enforcement, or engineering services, they may consider outsourcing certain programs and activities to nonprofit corporations.2

Municipal-nonprofit partnerships are prevalent nationally, and an increasing proportion of government programs are managed or supported in some capacity by nonprofit corporations. A recent study of city budgets in North Carolina found that of the nonprofits funded by cities, 31 percent related to recreation, arts, and culture; 18 percent to economic development (such as chambers of commerce and business incubators); and 12 percent to public safety services.3

1 Ms. Coates is an attorney at Jenkins & Hogin, LLP, where she serves as an Assistant City Attorney to the cities of West Hollywood, Rolling Hills, and Malibu. Ms. Coates earned her J.D. from Harvard Law School and Masters in Business Administration from Woodbury University, and possesses a certificate in grantwriting from California State University, Dominguez Hills. Countless hours of pro bono work over the years have contributed to her knowledge of issues related to nonprofit organizations, particularly related to formation and qualification for tax- exempt status. 2 However, labor agreements may limit the ability of a city to outsource certain jobs, even to a nonprofit corporation. 3 Gordon P. Whitaker and James C. Drennan, Local Government and Nonprofit Organizations, COUNTY AND MUNICIPAL GOVERNMENT IN NORTH CAROLINA, UNC-Chapel Hill School of Government (2007), available at http://www.sogpubs.unc.edu/cmg/cmg11.pdf

45 “Private groups participate in the management of half of the seventeen hundred parks in New York City,” including Central Park, and “business improvement districts manage the entire area between the White House and the Capitol” in Washington, D.C.4 Hundreds of BIDs exist throughout the State of California and there are close to 40 in the City of Los Angeles alone.5

This paper discusses the unique legal issues involved in the provision (or support) of public services through nonprofit corporations in California. Section I outlines the fairly simple process of forming a nonprofit corporation in California. Section II reviews reasons that cities commonly cite as motivation for forming or partnering with nonprofit corporations. One of the most common reasons is the perception that a private entity has greater flexibility than a government agency because it is not considered a “local agency” under California law. However, Section III outlines three important laws that may apply to nonprofit corporations: the Brown Act, Public Records Act and Political Reform Act. Section IV concludes with a discussion regarding the extent to which a city may want to retain oversight and/or control over its nonprofit corporation.

I. Process of Forming a California Nonprofit Corporation

Nonprofit corporations are exempt from federal income taxation pursuant to 26 U.S.C. 501(c), but are not automatically exempt from taxation under state law. A nonprofit corporation must apply for exemption from state tax after obtaining tax-exempt status from the IRS. It is important to note that not all nonprofit corporations are eligible for 501(c)(3) status, even if they support a government activity. For instance, chambers of commerce and business leagues are 501(c)(6) organizations, social clubs are 501(c)(7) organizations, and civic leagues whose membership is limited to employees of a particular municipality are 501(c)(4) organizations. 501(c)(3) organizations are formed for charitable purposes, which includes “lessening the burdens of government.” 6 To qualify for exemption as an organization that “lessens the burden of government,” the government must consider the activities to be the government’s responsibility, and the activities of the organization must actually “lessen” the burden of a government agency. Affordable housing development corporations, volunteer fire companies, and economic development corporations are examples of organizations likely to satisfy the test.

Nonprofit corporations are formed according to procedures set forth in state law, which prescribe a fairly simple process. Articles of incorporation must be filed with the Secretary of State and contain the information required by the California Nonprofit Corporation Law.7 Cities

4 Michael Murray, Private Management of Public Spaces: Nonprofit Organizations and Urban Parks, 34 HARV. ENV. L. REV. 179, 180 (2010). 5 City of Los Angeles, Office of the City Clerk, “A Quick Guide to Business Improvement Districts: BIDS 101,” available at http://clerk.lacity.org/stellent/groups/Departments/@CLERK_BID_Contributor/documents/Contributor_Web_Conte nt/LACITYP_025722.pdf 6 Income Tax Regulations, 26 C.F.R. §1.501(c)(3)(d)(2). 7 Corp. Code §§ 5000 et seq.

46 “are authorized to establish, fund, and operate nonprofit organizations.”8 If the corporation is created by an elected legislative body to exercise delegated authority, an additional copy of the articles must be filed with the Secretary of State for forwarding to the Controller.9 If the corporation is created for a limited duration, the articles must provide for termination, otherwise the corporation’s existence continues in perpetuity.10 A nonprofit corporation’s activities are governed by its bylaws11 and any other adopted policies, and guided by its adopted mission.

By its nature, a mission statement limits a nonprofit corporation’s scope of activity and target audience, and provides a baseline for performance evaluation. One of the first questions that should be asked before a city forms a nonprofit corporation is whether a nonprofit corporation already exists that is willing and able to assist with the desired program or activity. Partnering with an existing organization will save considerable resources and lead time involved in forming a corporation and awaiting federal and state determinations of tax-exempt status. Also, an existing organization may already have developed an effective fundraising model, obviating the need to create one for a newly formed nonprofit. Where partnering with an existing organization is not an option, the city may consider forming a new nonprofit corporation.

II. Incentives to Utilize Nonprofit Corporations

Nonprofit corporations are relied upon to provide or assist with public activities for a number of reasons. Commonly-cited motivations include the need or desire to: 1) fund expansion of public services or programs with alternative revenue sources; 2) shift liabilities from the city to a private entity; 3) engage a non-governmental neutral intermediary or independent contractor; and 4) operate outside of the restrictions applicable to government agencies. Each motivation is discussed in greater detail below.

A. Expanding Services and Programs with Alternative Revenue Sources

1. Private Donations

Because nonprofit corporations are primarily funded by private donations and grants, they provide an opportunity to expand public services without placing an additional strain on public funds. Although donors receive the same financial benefit from giving to a government agency as to a nonprofit corporation (and either donation effectively results in subsidization),12 nonprofit corporations are generally more effective than government agencies at attracting

8 Municipal Law Handbook, section 1.85, League of California Cities (2013); Corp. Code §§ 5065, 5120. 9 Corp. Code § 5120(e). 10 Corp. Code § 5120(c). 11 Corp. Code §§ 5150 - 5153. 12 Charitable donations to a governmental unit are tax-deductible under section 170(c)(1) of the Internal Revenue Code if made for a public purpose.

47 donations and volunteers.13 One theory suggests that nonprofit corporations are more attractive to donors because they have lower monitoring costs and have financial incentives inapplicable to government agencies.14 Some people may assume that private entities are more efficient than the government and are therefore more willing to subsidize their work. Alternatively, some people may feel that they are “captive” contributors to government through taxation and are unwilling to voluntarily contribute more.

Also, nonprofits are in the business of raising funds and can be adept at doing so. They have access to sources that facilitate large fundraising campaigns such as Charitybuzz.com (an online auction broker of luxurious items for charities) and GuideStar (an information service that provides financial reports and other records that contribute to the perception that nonprofits are more transparent or accountable than government agencies), while governments typically neither engage in direct solicitation nor participate in broad fundraising efforts. As a result, the general public simply may not be aware that they can make tax-exempt donations to government agencies. One exception to this generality is the fairly common bequest of land to governments. For instance, the Los Angeles Griffith Park was transferred through bequest. Cities are advised to pay close attention to the terms and conditions contained in these land grants. Where a grant places a restriction on use of the land (i.e., the land can only be used for a park) and contains a right of reversion in the grantor or grantor’s heirs, the government’s interest in the property can be lost if the restrictions are not respected.15

2. Tax-Exempt Revenue Bonds

Tax-exempt revenue bonds may provide a substantial source of financing for eligible projects (such as capital improvement, economic development projects, and construction of public facilities) conducted by nonprofit corporations. Unlike bonds issued by a city, these revenue bonds are not subject to voter approval. Voters are not entitled to decide whether nonprofit corporation revenue bonds should be issued because debt service is derived from revenue sources such as parking fees, admission charges, and lease payments, and does not constitute a general obligation of the public. However, the community receives public benefits from the project. Today, we take for granted that nonprofit corporations have access to tax- exempt revenue bonds, but the scheme was not always favored.16

13 See Michael Murray, Private Management of Public Spaces: Nonprofit Organizations and Urban Parks, 34 HARV. ENV. L. REV. 179, 180 (2010). 14 Id. at 202-203 (“responsibility to, or dependence on, contributors… incentivizes behavior that attracts donors.”). 15 See, e.g., Walton v. City of Red Bluff (1991) 2 Cal.App.4th 117, in which property granted to the city for the purpose of maintaining a library, subject to reversion reverted to the grantor’s heirs because the city failed to maintain a library; and City of Palm Springs v. Living Desert Reserve (1999) 70 Cal.App.4th 613, 622, in which the court found that conveyance of property to the city for use as a desert wildlife preserve subject to a reversionary interest did not place the property into the public trust, but “must be construed as granting to the City a fee simple subject to a condition subsequent, and assigning [grantor] a power of termination.” 16 See, e.g., Hart H. Spiegel, Financing Private Ventures with Tax-Exempt Bonds: a Developing ‘Truckhole’ in the Tax Law, 17 STAN. L. REV. 224, 227 (1965). The article laments that IRS policy, culminating with Revenue

48 The Bergeson-Peace Infrastructure and Economic Development Bank Act17 authorizes the California Infrastructure and Economic Development Bank (“I-bank”) to serve as a conduit issuer of tax-exempt and taxable bonds on behalf of 501(c)(3) organizations pursuing eligible projects. Bond proceeds must create public benefits in the community where the project is located by enhancing the economic, social, or cultural quality of life for local residents, and be used for a project consistent with any existing local or regional comprehensive plan. 18 In recent years, the I-bank has issued revenue bonds on behalf of 501(c)(3) organizations such as the RAND Corporation, Youth Services Center of Riverside, San Francisco Ballet Association, Santa Barbara Center for Performing Arts, and Salvation Army.

3. Special Assessments (BIDs)

Business improvement districts (“BIDs”) are authorized by state law,19 created by ordinance subject to public hearing and majority protest, and provide a mechanism for revenue generation through special assessments for “activities” and “improvements” such as newsletters, private security and escorts, information booths, banners, holiday lights, street cleaning and maintenance, and promoting tourism and economic development. Special assessments must be commensurate with the benefits businesses receive from the BID’s activities,20 must be periodically renewed by city council,21 and provide a reliable source of funding as an alternative to general municipal funds or sporadic private donations.

Often, cities do not administer the activities and improvements funded by BID assessments, but contract with nonprofit corporations created for the sole purpose of bearing that responsibility. Assessment funds received by the city are transferred to the nonprofit corporation, and a contract specifying the terms of the arrangement is entered into by the city and

Ruling 63-20, results in “erosion of the tax base” by expanding “private” access to tax-exempt financing, and questions the legitimacy of the public benefit of such projects. (“Typically, a private “nonprofit” corporation is organized. Its revenue bonds are issued to obtain funds with which to build the aluminum mill, garage, or other facility, which is then leased to private interests. The proceeds from the long-term lease of the facility are pledged to amortize the bonds. At the end of thirty to forty years the facility belongs to the city. A package of this sort presented to the city council has great appeal. The city invests nothing and becomes the owner of a project, without cost, after thirty or forty years. Its own credit is not pledged on the bonds. It has all to gain and nothing to lose.”) at 227. 17 Gov. Code §§ 63043 – 63047. 18 See Gov. Code §§ 63043 – 63047 and501(c)(3) Revenue Bond Program description available at www.ibank.ca.gov/501c3_bonds.htm. I-bank applications must contain a project description including, among other things, a comprehensive summary of all public benefits of the project and description of any past, present or potential controversy connected with the project or its financing. California Infrastructure and Economic Development Bank Policies and Procedures for Conduit Revenue Bond Financing for Economic Development Facilities (updated August 24, 2010), section II.B. 19 In California, BIDS are most commonly formed pursuant to the Parking and Business Improvement Area Law of 1989 or the Property and Business Improvement District Law of 1994 (Streets & Highways Code §36500 et seq. and §36600 et seq., respectively). 20 See, e.g., Sts. & High. Code § 36536. 21 Assessments levied under the 1989 Act must be renewed annually, while assessments under the 1994 Act may be approved for five-year periods

49 the nonprofit. The term of the contract should coincide with the term of the approved assessment, subject to renewal concurrent with the BID assessment. In the Los Angeles area, this model has been adopted for several BIDs in the City of West Hollywood22 and Downtown Santa Monica.23 Business owners in West Hollywood have voiced their approval of this model’s ability to provide tailored services and programs to businesses and provide a catalyst for public- private collaboration.24 For cities with BIDs whose primary activities are not traditionally within the purview of government agencies (such as concert, special event, or tourism planning and promotion), use of a nonprofit corporation may relieve the city of otherwise having to develop or retain in-house expertise.

B. Shifting Liabilities to a Private Entity

1. Affordable Housing

State law mandates that cities provide their “fair share” of affordable housing to meet regional housing needs.25 However, cities are not required to assume the liabilities incident to developing and managing affordable housing to satisfy this statutory requirement, which could be substantial. Instead, cities may offer density bonuses and other incentives to developers,26 may cooperate with projects that qualify for federal and state low income housing tax credits (“LIHTC”), and may administer affordable housing programs through a separate nonprofit corporation. Cities may wish to avoid directly serving as affordable housing developer/property manager for the reasons illustrated below.

In California, the Tax Credit Allocation Committee administers the federal and state LIHTC programs. Those programs require that eligible tenants have an equal opportunity to apply for an affordable unit, which is oftentimes accomplished through a lottery. A city may facilitate the lottery process, in which interested persons complete a lottery or waitlist application, are evaluated by city staff for income eligibility, and eligible applicants are sorted in a random order used to determine the order in which applicants will be invited to submit rental applications. Rental applications are ultimately evaluated by the property manager. Imagine that an applicant files a claim with the California Department of Fair Employment and Housing (“DFEH”) alleging that they were denied housing on the basis of an unlawful discrimination. If the city is not the property manager, its obligations in responding to such a claim and the scope of its potential liability are greatly reduced.27

22 http://thesunsetstrip.com/info/about-sunset-strip-business-association-ssba 23 http://www.downtownsm.com/ 24 Most recently in a joint presentation by business owner Nic Adler and Mayor John D’Amico at the May 2014 California Contract Cities Association 55th Annual Municipal Seminar. 25 Gov. Code § 65584. 26 Authorized by Gov. Code § 65915 – 65918. 27 See Attachment 1 for a sample list of questions from DFEH in its investigation of a claim alleging discrimination on the basis of a disability in connection with a LIHTC lottery.

50 Beyond housing discrimination complaints that could lead to federal litigation, cities may wish to avoid the potential political backlash of exercising basic landlord rights such as evictions, inspections, and retaining a portion of a tenant’s security deposit where appropriate. Tenants may attempt to use council meetings as the venue to voice their discontent. Elected officials may feel political pressure to take (or avoid) actions that affect registered voters, particularly during election season. These factors add an undesirable layer of complexity to the landlord-tenant relationship, which by its nature is often fraught with difficulties.

As separate entities, nonprofit housing corporations have the potential to insulate cities from the challenges discussed above and others, while allowing the city to retain some level of influence over the provision of affordable housing within its boundaries. Further, some sources of grant funds may only be available to non-governmental organizations. As separate entities, housing corporations may benefit from being governed by a diverse board of directors representing public officials, public employees, business and community leaders, developers, and affordable unit residents, can greatly contribute to creative productivity.

Many cities, including the City of West Hollywood, whose Community Housing Corporation has developed 14 apartment communities ,28 counties, and groups of cities utilize nonprofit corporations to provide affordable housing.

2. Construction of Public Facilities (Lease-backs)

Construction of public facilities and infrastructure often involves long-term and greatly expensive projects that lend themselves to a lease, lease-back arrangement. The lease-back arrangement typically involves a government agency leasing undeveloped land to a developer who bears responsibility for constructing a public facility that, when completed, is leased back to the government agency. The California Attorney General has described the lease-back as “commonly used to finance the construction of public facilities through the aegis of a nonprofit corporation, thus avoiding the debt limitation provisions of the California Constitution applicable to the state and local governments.”29 It is a “classic medium” that has “been approved in cases such as Dean v. Kuchel (1950) 35 Cal.2d 444; City of Los Angeles v. Offner (1942) 19 Cal.2d 483 and County of Los Angeles v. Nesvig (1965) 231 Cal.App.2d 603,”30 and used for construction of stadiums, sports arenas, theaters, and even rubbish incinerators.

Sections 5.235 and 5.236 of the Municipal Law Handbook discuss lease-back agreements and provide an outline of requirements.31 In addition, a lease-back agreement whose term exceeds five years must receive prior authorization by an ordinance subject to referendum.32

28 West Hollywood Community Housing Corporation, “What We Do,” available at http://www.whchc.org/index.php?option=com_content&view=article&id=160&Itemid=78 29 70 Ops.Cal.Atty.Gen. 57 (1987), n. 2. 30 70 Ops.Cal.Atty.Gen. 57 (1987). 31 “1) Rent must be abated when a city does not occupy or have beneficial use of the property.

51 The lease-back arrangement has oft been upheld against legal challenges. In one of the most notable cases, Los Angeles County v. Nesvig,33 the court upheld the County’s lease, lease- back arrangement crafted to facilitate construction of the theater and forum now known as the Music Center in downtown Los Angeles. The arrangement involved a County lease of land to a private entity responsible for construction, and a lease-back of the constructed facility to the County for 30 years, with a concurrent sublease authorizing a non-profit organization to manage and operate the Music Center on behalf of the County. The arrangement was challenged as violating the constitutional debt limit. The court held:

“if the lease or other agreement is entered into in good faith and creates no immediate indebtedness for the aggregate installments therein provided for but, on the contrary, confines liability to each installment as it falls due and each year’s payment is for the consideration actually furnished that year, no violence is done to the constitutional provision.” However, the arrangement is invalid if it creates a “full and complete liability upon” execution of a single instrument or “is actually a conditional sales contract in which the ‘rentals’ are installment payments on the purchase price.”34

C. Engaging a Non-Government Organization

Particularly where activities involve sensitive political issues or a community mistrusting of government agencies, it may make sense to engage an independent nonprofit organization with strong community ties as a neutral intermediary. This approach proved successful when the Housing Authority of the County of Los Angeles (“Authority”) engaged the Advancement Project to conduct an in-depth assessment of the needs of the housing developments in the Watts community in preparation for revitalization of one of the most violent areas in Los Angeles. The Advancement Project is a California-based nonprofit civil rights organization that concentrates on issues related to inequality in access to public services in minority and disadvantaged communities. As a non-government organization with strong credibility in and ties to the community, the Advancement Project was able to gain greater access to information than the Authority likely could have. The Advancement Project produced a community assessment and recommended violence reduction strategies, which are being implemented through an ongoing collaboration including the Los Angeles Police Department and the Authority, and confirmed by a 2011 inter-agency agreement. According to the Advancement Project, the resulting Community Safety Partnership has reduced violent crime in Watts by more than 50 percent, notably decreased youth gang membership and activity, reduced homicide rates, and laid the

2) The obligation of a city to make payments must be on an annual basis and subject to appropriation (i.e., if the city council does not budget the funds for payment, payment is not due). Acceleration of rental payments in the event of non-appropriation or in the event of default is not allowed because to do otherwise would violate the debt limitation of Cal Const art XVI, §18. A covenant to appropriate annually is common. Further, acceleration of payments in the event of default is not a valid provision of a financing lease. 3) Fair market rent should be paid for the property, taking into consideration the nature and use of the property and any option to purchase.” 32 Gov. Code § 54240 et seq. 33 (1965) 231 Cal.App.2d 603. 34 Los Angeles County v. Nesvig (1965) 231 Cal.App.2d 603, 609-619 (quoting an extensive list of cases).

52 groundwork for future investment in the community that may be conducted by the Authority and/or others.35

Cities with limited resources often outsource certain activities to independent contractors. In some cases, nonprofit corporations may be available to serve as independent contractors. For instance, the Institute for Building Technology and Safety (“IBTS”) is a 501(c)(3) nonprofit corporation that performs a variety of municipal services, such as administrative services and communications, financial services, planning and zoning, public works, engineering and floodplain management, code enforcement, permit issuance and inspections, and emergency preparedness. One of IBTS’s more vocal clients is the City of Central, Louisiana, whose arrangement with IBTS includes the corporations’ pledge to return excess income to the city if expenses are less than the contract award, among other benefits.36

D. Operating Outside of the Restrictions Applicable to Government Agencies

Likely the most cited reason that government agencies perform certain activities through nonprofit corporations is the presumption that private entities are exempt from the regulations applicable to public agencies. Cities are “government actors” that must avoid restraining the public’s freedom of speech and expression, and must avoid discriminating on the basis of a protected characteristic. They must adhere to the debt limit contained in the California Constitution, the open meeting requirements of the Brown Act, the disclosure requirements of the Public Records Act, and the reporting requirements of the Political Reform Act. Cities generally must receive voter approval to raise revenue through taxes, special assessments, and bonds. Finally, labor agreements, fiscal policies, and other regulations may increase operational costs and reduce flexibility in ways inapplicable to private organizations.37 However, as Section III explains, nonprofit corporations can be subject to many of the same restrictions as cities, depending on their structure and operations.

III. Nonprofit Corporations are Sometimes Treated as Government Agencies

While nonprofit corporations are generally exempt from the legal restrictions applicable to cities, nonprofit corporations serving a governmental function may be subject to laws applicable to cities in very fact-specific circumstances. Generally, when statutory requirements apply to a government entity, it cannot avoid the statutory requirements by delegating administrative responsibilities to a nonprofit corporation.38 Even if a nonprofit corporation is not

35 http://www.advancementprojectca.org/?q=Community-Safety-Partnership-Los-Angeles 36 Recently discussed in a joint presentation at the September 2013 International City/County Management Association (“ICMA”) conference. The conference power point is available at http://www.ibts.org/services/municipal-services.html 37 But see section III for a discussion on when the laws applicable to cities may apply to nonprofit corporations. 38 See, e.g., 81 Ops.Cal.Atty.Gen.281 (1998) (finding that a nonprofit created by a redevelopment agency generally must comply with the same laws and regulations as the agency itself, including open meeting laws, acquisition and relocation requirements, and public bidding and prevailing wage statutes).

53 legally required to comply with the Brown Act, Public Records Act, and Political Reform Act, it may wish to voluntarily opt in to the extent practicable.

A. Brown Act

The governing board of a nonprofit corporation may be a “legislative body” subject to the Ralph M. Brown Act. Government Code section 54952(c) provides that a “legislative body” includes:

“(c) (1) A board, commission, committee, or other multimember body that governs a private corporation, limited liability company, or other entity that either:

(A) Is created by the elected legislative body in order to exercise authority that may lawfully be delegated by the elected governing body to a private corporation, limited liability company, or other entity.

(B) Receives funds from a local agency and the membership of whose governing body includes a member of the legislative body of the local agency appointed to that governing body as a full voting member by the legislative body of the local agency.”

Whether a nonprofit is “created” by the elected legislative body of a government agency is a question of law.39 “To ‘create’ means, among other things, ‘to bring into existence,’ or ‘to produce or bring about by a course of action or behavior.’”40 A property owners association created by a city to perform administrative functions related to a business improvement district funded by assessments is a “legislative body” subject to the Brown Act.41 In Epstein v. Hollywood Entertainment Dist. II Business Improvement District, the District argued that its board was not subject to the Brown Act because, among other things, the District provided only “supplemental” services to the city.42 Calling it “backwards” to focus on the “supplemental” nature of the services, the court clarified that application of the Brown Act turns not on “the kinds of services, so much as the nature of the source of funding to be used for them.”43

A nonprofit corporation formed to provide programming for a cable television channel set aside for educational use by a cable operator pursuant to its franchise agreement with a city and designated by the city to provide the programming services is subject to the Brown Act.44 A nonprofit entity created by a community redevelopment agency, and delegated authority of the agency, is subject to the Brown Act.45 Although the Brown Act may apply, a nonprofit

39 Epstein v. Hollywood Entertainment Dist. II Business Improvement Dist. (2001) 87 Cal.App.4th 862, 876. 40 Californians Aware v. Joint Labor/Management Benefits Com. (2011) 200 Cal.App.4th 972, 979-980 (quoting 92 Ops.Cal.Atty.Gen. 102, 107 (2009)). 41 Epstein v. Hollywood Entertainment Dist. II Business Improvement Dist. (2001) 87 Cal.App.4th 862. 42 Id. at 874. 43 Id. (emphasis in original). 44 85 Ops.Cal.Atty.Gen. 55 (2002). 45 81 Ops.Cal.Atty.Gen. 281 (1998).

54 corporation’s board may not be authorized to meet in closed session with the city attorney of its creating city. For instance, the Brown Act does not authorize a nonprofit created by a redevelopment agency and delegated authority to negotiate settlement of eminent domain disputes to meet in closed session with the redevelopment agency’s legal counsel unless the nonprofit is a party to the dispute.46

A private pre-existing corporation does not become subject to the Brown Act by simply entering into a contractual arrangement to exercise authority that a government entity could exercise.47 Further, a nonprofit corporation is not subject to the Brown Act merely because it receives public funds.48 For instance, the DWP nonprofits discussed in Section IV(A) below are not subject to the Brown Act because, although funded by the city, their boards do not include a member of the legislative body of the city.49

B. Public Records Act

As a private corporation, a nonprofit is generally not subject to the Public Records Act; 50 however, “entities that are legislative bodies of a local agency pursuant to subdivisions (c) and (d) of Section 54952 [of the Brown Act]”51 must comply with the Public Records Act.52 To emphasize, not all nonprofits subject to the Brown Act are subject to the Public Records Act— only those subject to the Brown Act under subdivision (c) or (d) of Section 54952 of the Government Code. Nonprofit corporations that voluntarily subject themselves to the Brown Act do not consequently become subject to the Public Records Act. Meeting agendas and other writings distributed to a majority of a board subject to the Brown Act in connection with a matter subject to discussion or consideration at an open meeting are public records.53

C. Political Reform Act

46 Shapiro v. Board of Directors of the Centre City Development Corporation, 134 Cal.App.4th 170, 182 (2005) (“we look to the content of section 54956.9 to determine whether a meeting between the legislative body of one local agency and the legal counsel of another local agency falls within the narrow category of closed-session meetings permitted by section 54956.9. Doing so, we conclude that nowhere in the plain text of section 54956.9 is the practice authorized.”). 47Epstein v. Hollywood Entertainment District II Business Improvement District, 87 Cal.App.4th 862, 871 (2001) (citing International Longshoremen’s & Warehousemen’s Union v. Los Angeles Export Terminal, Inc., 69 Cal.App.4th 287, 300, fn. 5). 48 Cal. Attorney Gen. Office, The Brown Act: Open Meetings for Legislative Bodies (2003) pp. 5-6, available at http://caag.state.ca.us/publications/2003_Intro_BrownAct.pdf 49 87 Ops.Cal.Atty.Gen.19 (2004). 50 See, e.g., Community Youth Athletic Center v. City of National City (2013) 220 Cal.App.4th 1385 and Consolidated Irrigation District v. Superior Court (2012) 205 Cal.App.4th 697. 51 Gov. Code § 6252 (a). 52 85 Ops.Cal.Atty.Gen.55 (2002) (“Our answer to the first question [applicability of the Brown Act] thus answers the second question [applicability of the Public Records Act].”) 53 Gov. Code § 54957.5(a).

55 The Political Reform Act contains two main requirements: covered agencies must adopt a conflict of interest policy and covered “public officials” must disclose their economic interests.54 Nonprofit board members are frequently wealthy and well-connected individuals who may prefer to keep their financial information private, and certainly do not think of themselves as “public officials” subject to public scrutiny. However, board members may be required to file statements of economic interest (FPPC Form 700) if the nonprofit corporation satisfies the four-part “Siegel test.” The requirements of the Political Reform Act cannot simply be ignored; violators may be subject to fines and criminal prosecution.55

The Political Reform Act defines “public official” as “every member, officer, employee or consultant of a state or local government agency.”56 The Fair Political Practices Commission (“FPPC”) defines “member” to include “salaried or unsalaried members of committees, boards or commissions with decisionmaking authority,” meaning that the committee, board or commission: (i) may make a final governmental decision; (ii) may compel a governmental decision; (iii) may prevent a governmental decision either by reason of an exclusive power to initiate the decision or by reason of a veto that may not be overridden; or (iv) makes substantive recommendations that are, and over an extended period of time have been, regularly approved without significant amendment or modification by another public official or governmental agency.57

In determining whether a nonprofit corporation is a “local government agency,” the FPPC considers four criteria:

(i) Whether the impetus for formation of the corporation originated with a government agency; (ii) Whether it is substantially funded by, or its primary source for funds is, a government agency; (iii) Whether one of the principal purposes for which it is formed is to provide services or undertake obligations which public agencies are legally authorized to perform and which, in fact, they traditionally have performed; and (iv) Whether the corporation is treated as a public entity by other statutory provisions.58

Over time, some general rules have developed. A nonprofit corporation may be subject to the Political Reform Act even if it does not satisfy all four criteria.59 Chambers of commerce, visitor bureaus, and downtown business associations perform activities that benefit government

54 Gov. Code §§ 87200 – 87210. 55 Gov. Code §§ 9100 – 91014. 56 Gov. Code § 82048. 57 Section 18701 of the Regulations of the FPPC, Title 2, Division 6, Cal. Code Regs., subdivision (a)(1). A comment to § 18701 advises: “In limited circumstances, the members of a nonprofit organization may be ‘public officials.’ (In re Siegel (1977) 3 FPPC Ops. 62.).” 58 In re Siegel (1977) 3 FPPC Ops. 62. 59 In re Carter (2002) FPPC Advice Letter A-02-202.

56 agencies, but are not necessarily traditionally performed by government agencies.60 Tax-exempt status alone is not sufficient to find that the corporation is treated as a public entity.61 However, a fact-specific analysis is required to determine whether any given nonprofit corporation is subject to the Political Reform Act. When in doubt, seek the advice of the FPPC.

In addition, a nonprofit corporation may be considered a “state actor” under federal law. For purposes of discrimination actions under 42 U.S.C. section 1983, a volunteer fire company is a “state actor” even if it is a private, nonprofit corporation,62 because “[f]ire protection is a public function which amounts to state action even if the fire protection unit is composed of voluntary or unpaid members,” and “most volunteer fire companies occupy town-owned land and buildings and utilize town-owned firefighting equipment.”63

IV. Maintaining Oversight and Control

Cities are advised to maintain ongoing oversight and an appropriate level of control over the nonprofit corporations that they create. Proper oversight can deter questionable financial practices of the nonprofit and control may be necessary in certain contexts.

A. Oversight as a Deterrent to Bad Behavior

Two nonprofit organizations (the Joint Safety Institute [JSI] and Joint Training Institute [JTI]) were created several years ago through collective bargaining between the City of Los Angeles Department of Water and Power (“DWP”) and its employees’ labor union. The organizations were created to administer workforce training and safety programs, and are contractually entitled to annual contributions from the City. A fairly recent news article reported that the City had contributed a cumulative $40 million, some portion of which was spent by the nonprofits on questionable activities.64 In response to the revelation, Los Angeles Mayor Eric Garcetti sought the financial records of the organizations, which they refused to disclose on grounds that they “are not city agencies and therefore not subject to open records laws.”65 Thus began the epic legal battle that continues today.

The City subpoenaed the nonprofit organizations’ financial records, and the organizations moved to quash the subpoena.66 In upholding the subpoena, the court found that while the operative agreements between the City and the organizations did not expressly subject them to a

60 Id. 61 Id. 62 Gibson v. Hurleyville Fire Co. No. 1, 1 F.Supp.2d 329, 330 (S.D.N.Y., 1998). 63 Survey of 1998 Nonprofit Case Law (January-June), 33 U.S.F. L. Rev. 231, 252 (Winter 1999). 64 Jack Dolan and Emily Alpert Reyes, DWP Union Boss Warns City Not to Withhold Payments to Nonprofits, L.A. TIMES, June 17, 2014. 65 D’Arcy v. Galperin, Los Angeles Superior Court Case No. BS146924, n. 9 (“The California Attorney General has stated that the JSI and JTI are not ‘public agencies’ subject to the open-meeting requirements of the Brown Act. 87 Cal.Ops.Atty.Gen. 19 (2004).” The ruling is subject to a stay while the Second District Court of Appeal reviews the lower court’s judgment. 66 Id.

57 City audit, a “broad construction” of the City’s charter provision authorizing the Controller to audit the accounts of “every person charged in any way with the safe-keeping or disbursement of public money” provided sufficient authority. Relying on People v. Johnson,67 which found that monies disbursed to a private entity remained “public funds” so long as the government continues to exercise supervision and control over the funds and their ultimate use, the court found that the grants remained “public funds” subject to audit under the City charter… “albeit barely.”68

As a third prong of the trifecta effort to learn how City funds were spent, the City replaced its appointed members on the organizations’ board of trustees. However, to avoid sharing information with the City’s appointees, the organizations refused to recognize the validity of the appointments and to meet. On July 18, 2014, the Los Angeles Superior Court ordered the organizations to recognize the City’s appointees, but declined to go so far as to order the board to meet.69

The unfortunate ordeal could have been avoided if the funding agreement included a provision authorizing the City to review the organizations’ accounts.

B. Control May Have Legal Implications

In some instances, the city may need to retain a certain amount of control over the nonprofit to protect certain legal interests. For instance, in Los Angeles County v. Nesvig,70 discussed in Section II(B)(2) above, the sublease operating contract incident to a lease-back arrangement was challenged as an unlawful delegation to a private entity of a government agency’s power. The court described the following “general rule”:

“while a public body may not delegate its power of control over public affairs to a private group, it may delegate the performance of administrative functions to such groups if it retains ultimate control over administration so that it may safeguard the public interest.” Thus, “there are two issues, whether the function is a proper one for delegation, and whether the manner of delegation retains the necessary, ultimate control over administration in the hands of the public entity.”71

Whether sufficient control is retained largely depends on the facts of the case. For instance, failure to retain control of prices charged for facilities is fatal; however, retention of control over long-term and short-term subleases, admission prices, concessions, food and refreshment prices, and/or the operator’s annual budget satisfies the rule.72

67 209 Cal.App.4th 800 (2012) (misappropriation of public funds by a group home). 68 D’Arcy v. Galperin, Los Angeles Superior Court Case No. BS146924. Because the ruling is based on an interpretation of the City charter, the court did not determine the nonprofits’ argument that they are not subject to the Public Records Act or the Brown Act (n. 11). 69 James McDaniel et al. v. Brian D’Arcy et al, Los Angeles Superior Court Case No. BC543782 (July 17, 2014 Tentative Ruling). 70 (1965) 231 Cal.App.2d 603. 71 Id. at 616-617 (internal citations omitted). 72 Id.

Also, see the discussion in Section IV(A) regarding the impact of control on the “public” character of funds transferred to nonprofit corporations.

Conclusion

Cities have significant opportunities to expand and enhance public services through the use of nonprofit corporations. It is fairly easy to form a nonprofit corporation in California, and depending on the organization’s purpose, achieving tax-exempt status may be straightforward as well. Nonprofit corporations may provide access to alternative funding sources, serve as a mechanism for cities to reduce liabilities incident to certain activities, act as neutral intermediaries or independent contractors, and may allow certain activities to be conducted outside of the restrictions applicable to cities. However, nonprofit corporations may be subject to laws applicable to cities such as the Brown Act, Public Records Act, and Political Reform Act, and an analysis should be performed prior to formation to ensure that the corporate structure is compatible with expectations. The questions that follow may assist in preliminary planning. After the appropriate structure is designed and the nonprofit is formed, cities are well-advised to maintain appropriate levels of oversight and control.

Preliminary Considerations for Creating Nonprofit Corporations

1. What is the “mission” of the activity or project, and what is its public benefit? 2. Does the mission or project have the potential to attract a dedicated base of donors and volunteers (i.e., might the project have “friends” or attract a “working board” that can assume some responsibilities of city staff)? 3. Can it be accomplished more efficiently by a private organization? 4. Are any existing nonprofit organizations in the community capable of accomplishing or contributing to the mission? If so, what is the relationship between existing nonprofit(s) and the city/community? 5. Would partnering with an existing nonprofit benefit the project in a unique way or relieve the city from costs involved in formation and management of a new nonprofit organization? 6. Do any aspects of the project necessitate city control over program design and/or implementation? 7. Does success of the project require that some or all activities occur outside of public scrutiny (i.e., would the purpose be frustrated if the organization were subject to the Brown Act and Public Records Act)? 8. Does the project qualify for alternative funding, such as tax-exempt revenue bonds, BID assessments, or grants?

59 9. If the city provides funding to the nonprofit, how will adequate control over and access to granted funds be accomplished? 10. Do labor agreements or other constraints prevent shifting city responsibilities to a private entity?

Attachment 1- Sample Inquiry from DFEH re: Housing Discrimination Claim

Environmental Legal Issues and Due Diligence When Cities Acquire Real Property

Thursday, September 4, 2014 General Session; 8:00 – 9:30 a.m.

Danielle G. Sakai, Best Best & Krieger

63 Notes:______

64 AVOIDING LEGAL ISSUES IN MUNICIPAL REAL PROPERTY ACQUISITIONS: Environmental Due Diligence and the “All Appropriate Inquiry”

By Danielle G. Sakai, Esq.1

I. Introduction

When a city or other public entity acquires real property the purchase is generally for a public project satisfying a public purpose and using public funds. In doing so, the agency is potentially putting public coffers at risk if unknown environmental issues are discovered on the property after the purchase. Thankfully, there are ways to avoid the potential pitfalls of environmental liability by undertaking the appropriate environmental due diligence before purchasing the property.

The goal of this paper is to assist public entities as they navigate the environmental due diligence mine field. It will first begin with a general background of the environmental laws imposing strict liability standards upon the owners and operators of contaminated property. Second, it will provide a background of available defenses to entities that are faced with potential liability. Third, it will provide a procedural roadmap ensuring compliance with the “All Appropriate Inquiries” (“AAI”) standard; which is a necessity for any purchaser seeking to qualify for the limited defenses available under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”)2 and the California equivalent, the Carpenter- Presley-Tanner Hazardous Substance Account Act.3

Finally, this paper will discuss the most common tools of Environmental Due Diligence; the Phase II Environmental Site Assessment and Phase II Site Investigation. The Phase I investigation is mainly a records search to gather information regarding the past use of property

1 Danielle Sakai is a partner in the Environmental and Natural Resources Practice Group of Best Best & Krieger LLP. Ms. Sakai advises public and private clients about Environmental Due Diligence and helps clients identify and respond to the discovery of contamination, including working with regulators towards remediation and agency closure and, if necessary cost recovery through litigation. Ms. Sakai can be contacted at [email protected]. 2 42 U.S.C. §§ 9601-9675 (2012). 3 California Health & Safety Code sections 57000 et seq.

65 to determine the likelihood of environmental contamination.4 The Code of Federal Regulations (“CFR”) provides the procedural requirements for conducting the AAI investigation.5 If the Phase I identifies any Recognized Environmental Conditions (“REC”), a Phase II Site Assessment is usually the next step. The Phase II entails a physical investigation into the actual condition of the property and looks for potential contamination. A public entity undertaking the AAI investigation detailed in this paper will be creating a solid foundation to shield itself from the harsh “sting” of liability.6

II. Public Agencies Are Not Immune From Environmental Liability

In order to address the problems presented by properties contaminated with hazardous substances, Congress passed CERCLA in 1980.7 Under CERCLA, there are four broad categories of potentially responsible parties (“PRPs”) subject to strict liability for cleanup costs.8 The four categories of PRPs are: (1) current owners and operators of the property;9 (2) any person who at the time of the disposal owned or operated the property;10 (3) “any person who . . . arranged with a transporter” for disposal of a hazardous substance owned or possessed by that person at the property;11 or (4) “any person who accept[ed] . . . hazardous substances for transport to disposal or treatment facilities . . . from which there [was] a release, or a threatened release.”12 If a public agency falls into one of these four categories, it may be held jointly and severally liable for the costs of remediation, irrespective of whether it caused or contributed to the contamination. This liability can result in hundreds of thousands, or even millions, of public dollars being spent to respond to a problems that someone else created.

4 See 40 C.F.R. 312.20. 5 Id. 6 PCS Nitrogen Inc. v. Ashley II of Charleston LLC, 714 F.3d 161, 168 (4th Cir., 2013). 7 Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601-9675 (2012). 8 Voggenthaler et al. v. Maryland Square LLC., 724 F.3d 1050, 1061 (9th Cir. 2013), vacated in part on other grounds, 2013 U.S. Dist. Lexis 173009 (D. Nev., Dec. 2013) (citing Cal. Dept. of Toxic Substances Control v. Hearthside Residential Corp., 613 F.3d 910, 912 (9th Cir. 2010)). See also 42 U.S.C. § 9601(32)(imposing the strict liability standard applied under section 311 of the Federal Water Pollution Act). 9 42 U.S.C. § 9607(a)(1). 10 42 U.S.C. § 9607(a)(2). 11 42 U.S.C. § 9607(a)(3). 12 42 U.S.C. § 9607(a)(4).

66 A. Available Defenses And Exemptions From Environmental Liability

When Congress enacted CERCLA, it established that a PRP will not be liable for releases of hazardous substances caused: (1) by an act of God; (2) an act of war; or (3) an act or omission of a third party that is not in a contractual relationship with the PRP.13 These defenses are very limited, however, and even the relatively broad third party defense has been held to only insulate the property owner at the time of the specific release or threatened release.14 Not only are there only limited defenses available, but qualifying for the defenses is difficult and requires the agency to take action even before it acquires the property.

1. Innocent Landowner Defense

In 1986, Congress amended CERCLA by adopting the Superfund Amendments and Reauthorization Act (“SARA”). Under SARA, Congress created a defense to liability that applies when a release or threatened of release of a hazardous substance is caused solely by a third party, even if the third party is in a contractual relationship with the PRP.15 The statute provides that an entity may qualify for this defense where it acquired property after a release occurred and one or more of the following circumstances are met:

(i) At the time the defendant acquired the facility the defendant did not know and had no reason to know that any hazardous substance which is the subject of the release or threatened release was disposed of on, in, or at the facility[;] (ii) The defendant is a government entity which acquired the facility by escheat, or through any other involuntary transfer or acquisition, or through the exercise of eminent domain authority by purchase or condemnation[; or] (iii) The defendant acquired the facility by inheritance or bequest.16

13 42 U.S.C. § 9607(b)(1)-(3). 14 State of New York v. Shore Realty Corp., 759 F.2d 1032 (2d Cir., 1985). 15 42 U.S.C. § 9601(35)(A). 16 42 U.S.C. § 9601(35)(A)(i)-(iii).

67 Importantly, to assert this defense, the PRP must have conducted an AAI investigation before acquiring the property.17 In addition, the PRP must also show that it took reasonable steps to: “[1] stop any continuing release, [2] prevent any threatened future release, and [3] prevent or limit any human, environmental, or natural resource exposure to any previously released hazardous substance.”18 The AAI analysis will be discussed in Section III, below.

2. Contiguous Property Owner Defense

In 2002, Congress again amended CERCLA by adopting the Small Business Liability Relief and Brownfields Redevelopment Act.19 The amendments created an additional CERCLA defense.

Known as the contiguous property owner defense,20 this defense applies to an entity whose property is not the source of contamination, but rather “contiguous or otherwise similarly situated with respect to” contaminated property. The property owner will not be liable for the contamination if it meets certain conditions.

First, to qualify for the defense, an entity must conduct an AAI investigation before acquiring the property.21 In addition, the entity must meet seven other criteria.22 These criteria are: (i) it did not cause, contribute or consent to the release; (ii) it is not potentially liable through any direct or indirect contractual, corporate, or financial relationship or the result of a business entity that is potentially liable; (iii) it takes reasonable steps to: (a) stop any continuing release, (b) prevent any threatened or future release, and (c) prevents or limits human, environmental, or natural resource exposure to any hazardous substances released; (iv) it provides full cooperation, assistance, and access to persons that are authorized to conduct response actions or natural resource restoration at the facility; (v) it is in compliance with any land use restrictions or relied on in connection with the response action at the facility and it does not impede the effectiveness

17 40 C.F.R. 312.1(b)(1)(i). 18 42 U.S.C. § 9601(35)(B)(i)(II)(aa)-(cc). 19 Pub. L. No. 107-118 (2002), codified at 42 U.S.C. § 9601(35). 20 42 U.S.C. § 9607(q)(1)(A) 21 42 U.S.C. §9607(q)(1)(A)(viii)(I). 22 See 42 U.S.C. § 9607(q)(1)(A)(i)-(viii).

68 of institutional controls employed in connection with a response action; (vi) it is in compliance with any request for information or administrative subpoenas issued by the President; (vii) it provides all legally required notices with respect to the discovery or release of any hazardous substances.23 It is important to recognize that for this defense to apply, the buyer of the property knows, “that the property was or could be contaminated or threatened release . . . from other real property not owned or operated by the person.”24

PRACTICE TIP: In addition to making sure that the agency is covered by the contiguous property owner defense, it may be appropriate to negotiate with the seller for a reduced purchase price or consider the availability of environmental insurance.

3. Bona Fide Prospective Purchaser Exemption

The bona fide prospective purchaser exemption (“BFPP”) was also established by the 2002 amendments. Under this exemption, an entity will not be liable if it acquires contaminated property and its potential liability is based solely on it “being . . . an owner or operator” of the subject property.25 To be deemed a BFPP, the entity must conduct an AAI investigation into the previous ownership and demonstrate that the release or threatened release of hazardous substances occurred before the entity acquired it.26 Notably, this defense is only available to entities that have acquired property after January 11, 2002. Furthermore, the entity must acquire the property with the knowledge, or having reason to know, that it is contaminated.27 In addition to conducting an AAI investigation, an entity seeking to qualify as a BFPP must establish that it: (1) acquired the property after the hazardous substances were spilled,28 (2) provided all legally required notices about the hazardous substances used on the property,29 and (3) took steps to stop any ongoing spill, prevent future spills, and limit the exposure from past spills.30 PRACTICE

23 42 U.S.C. § 9607(q)(1)(A)(i)-(viii). 24 42 U.S.C. § 9607(q)(1)(A)(viii)(II). 25 42 U.S.C. § 9607(r)(1). 26 42 U.S.C. § 9601(40)(B)(i). 27 42 U.S.C. §§ 9601(40)(B). 28 42 U.S.C. §9601(40)(A) 29 42 U.S.C. § 9601(40)(C) 30 Voggenthaler et al. v. Maryland Square LLC., 724 F.3d 1050, 1062 (9th Cir. 2013), vacated in part on other grounds, 2013 U.S. Dist. Lexis 173009 (D. Nev., Dec. 2013) (citing 42 U.S.C. § 9601(40)(D)).

69 TIP: Before closing the sale, the public entity may want to consider the availability of local or Federal Brownfield Grants or whether it could enter into a Prospective Purchaser Agreement with the appropriate regulatory agency, like the California Department of Toxic Substances Control or an agreement under the California Land Use and Revitalization Act.

It must be noted that for all of the defenses discussed above, the purchaser must have undertaken an AAI prior to the acquisition.

4. Due Care Requirements

In addition to engaging in an AAI, after the acquiring agency takes ownership of the property, it must exercise due care in responding to the environmental issues.

In the seminal case of PCS Nitrogen Inc. v. Ashley II of Charleston LLC,31 the Court of Appeals for the Fourth Circuit addressed whether the current owner of a contaminated parcel of property qualified as a BFPP.32 The property was contaminated with lead, arsenic, and several other hazardous substances as a result of several decades of phosphate fertilizer production.33 The defendant, Ashley II of Charleston (“Ashley”), purchased the property knowing it was contaminated, and with the intent to remediate the contamination.34

In addressing the issue, the Fourth Circuit focused its analysis on the “appropriate care standard” a PRP must show to qualify as a BFPP. After discussing the elements of the BFPP defense (discussed above),35 the court held that, to qualify as a BFPP, a current owner must show that it “took all precautions with respect to the particular waste that a similarly situated reasonable and prudent person would [take] in light of all relevant facts and circumstances.”36 Applying that standard, the court held that Ashley did not qualify as a BFPP.37 Specifically, the court found that, because Ashley had failed to address the RECs identified in the Phase I Report,

31 714 F.3d 161 (4th Cir., 2013). 32 Id. at 179-80. 33 Id. at 169. 34 Id. at 171. 35 See 42 U.S.C. § 9601(40)(A)-(H), 9607(r)(1). 36 PCS Nitrogen Inc., 714 F.3d at 181 (quoting New York v. Lashins Arcade Co., 91 F.3d 353, 361 (2d Cir. 1996). 37 Id. at 181.

70 resulting in further releases and failed to properly maintain the property, the defendant did not exercise appropriate care for the site, and did not qualify as a BFPP. 38

PRACTICE TIP: Not only does the purchaser need to conduct the Environmental Due Diligence, but it cannot simply ignore the environmental conditions discovered. The agency must take the steps necessary address on-site conditions if it wants to ensure it is entitled to a defense from liability.

5. State And Local Government Exemption From Owner Or Operator Liability

In addition to the above defenses and exemptions, CERCLA provides state or local governmental entities exemptions from liability as an “owner or operator” if the entity “acquire[s] ownership or control involuntarily through a bankruptcy, tax delinquency, abandonment or other circumstances in which the government involuntarily acquired title by virtue of its function as sovereign.”39 This exception also applies to governmental entities acquiring property by means of its eminent domain power; either through judicial process or purchase.40

This exemption will not apply, however, if the government entity has “caused or contributed to the release or threatened release of a hazardous substance from the facility.”41

PRACTICE TIP: To the extent that the public agency must acquire contaminated property, it should consider using the power of eminent domain because while it may have to still face a state nuisance action, it will be protected from the draconian reaches of CERCLA.

38 Id. 39 42 U.S.C. § 9601(20)(D). See also Jerry Clifford and Lawrence E. Starfield, EPA Memorandum: Municipal Immunity from CERCLA Liability for Property Acquired Through Involuntary State Action ( Oct. 20, 1995), available at http://www2.epa.gov/sites/production/files/documents/immunity-cercla-mem.pdf. 40 EPA Memorandum: Municipal Immunity from CERCLA Liability for Property Acquired Through Involuntary State Action, supra, citing 42 U.S.C. § 9601(35)(A); 42 U.S.C. § 9607(b)(3). 41 42 U.S.C. § 9601(20)(D).

71 III. AAI Procedure

The AAI process entails evaluating a property’s environmental conditions and assessing the likelihood of contamination.42 In 2005, the EPA published standards and practices for conducting AAI.43 The Final Rule went into effect in 2006.44 In December of 2013, EPA issued a Final Rule that updated its AAI standard.45 Currently, to conduct an AAI investigation, an entity must either comply with the AAI Final Rule Requirements, or follow the standards set forth in the American Society for Testing and Materials (“ASTM”) E1527-13 (hereinafter ASTM Standard E1527-13).46 The provisions are substantially similar to one another, but this paper will explain notable differences between the two.

The purposes of an AAI investigation is to “permit an entity to satisfy one of the requirements to qualify for the innocent landowner, contiguous property owner, or bona fide prospective purchaser limitations on CERCLA liability.”47 That is, the process of conducting an AAI investigation allows the entity to investigate and discover recognized environmental conditions or “RECs” that may subject the entity to future liability.48 As defined under ASTM Standard E1527-13, REC means “the presence or likely presence of any hazardous substances . . . in, on, or at a property” caused by a release, threat of release, or under “conditions that pose a material threat of a future release [of a hazardous substance] to the environment.”49

A. Phase I: Environmental Site Assessment

The Code of Federal Regulations provides detailed requirements for an AAI investigation. The following procedures must be followed in undertaking the AAI investigation.

42 EPA, All Appropriate Inquiries Rule: Reporting Requirements Checklist for Assessment Grant Recipients, available at http://www.epa.gov/brownfields/aai/AAI-Reporting-fact-sheet-and-checklist-062111-Final.pdf. 43 See 40 C.F.R. § 312.20. 44 40 C.F.R. § 312.20. 45 See 78 Fed. Reg. 79319 (Dec. 30, 2013) (adopting ASTM Standard E1527-13 as an acceptable standard for conducting AAI investigations for complying with the Federal All Appropriate Inquiry rule). 46 Id. 47 ASTM E1527-13(1.1). 48 Id. at 1.1.1. 49 Id.

72 First, it must include an investigation by an environmental professional, as defined under the law.50 In conducting the investigation, the environmental professional must:

• Investigate whether the entity has “specialized knowledge” for the purpose of identifying conditions indicative of releases or threatened releases;51

• Investigate the relationship of the purchase price to the value of the property, if it was not contaminated;52

• Interview past and present owners, operators, and occupants;53

• Search for recorded environmental cleanup liens;54

• Review federal, tribal, state, and local government records regarding the property;55 and

• Visually inspect the property and adjoining properties.56

In addition to the above factors, the environmental professional must complete a written report detailing his or her findings.57 Each of these factors will be discussed in detail below.

1. Analysis By An Environmental Professional

For purposes of an AAI investigation, an “environmental professional” is any “person who possesses sufficient specific education, training, and experience necessary to exercise professional judgment to develop opinions and conclusions regarding conditions indicative of releases or threatened releases on, at, in, or to a property, sufficient to” conduct the AAI inquiry.58 “Experience,” means the individual has participated in previous AAI inquiries or

50 40 C.F.R § 312.20(a)(1) 51 40 C.F.R. § 312.22(a)(2) (citing 40 C.F.R. §312.28(a)). 52 40 C.F.R. § 312.22(a)(3) (citing 40 C.F.R. § 312.29)). 53 40 C.F.R. § 312.20(b)(1) (citing 40 C.F.R. § 312.23(a)). 54 40 C.F.R. § 312.25(a)-(b). 55 40 C.F.R. § 312.26(a). 56 40 C.F.R. § 312.20(b)(4) (citing 40 C.F.R. § 312.27). 57 40 C.F.R. § 312.21(c)(1). 58 40 C.F.R. § 312.10(b)(1) (citing 40 C.F.R. § 312.20(e) and (f)).

73 similar environmental site assessments “which involve the understanding of surface and subsurface environmental conditions and the processes used to evaluate these conditions.”59 In addition to the above requirements, an environmental professional must also:

(i) Hold a current Professional Engineer's or Professional Geologist's license or registration from a state, tribe, or U.S. territory . . . and have the equivalent of three (3) years of full-time relevant experience; (ii) Be licensed or certified by the federal [or state government] . . . to perform environmental inquiries . . . and have the equivalent of three (3) years of full-time relevant experience; (iii) Have a Baccalaureate or higher degree from an accredited institution of higher education in a discipline of engineering or science and the equivalent of five (5) years of full-time relevant experience; or (iv) Have the equivalent of ten (10) years of full- time relevant experience.60

PRACTICE TIP: Do not go with the least expensive “environmental professional” Be sure that the person has sufficient experience, a good reputation and is fully insured. You do get what you pay for. A consultant that commoditizes due diligence is not going to be as careful and provide as much useful information that the agency needs to meet its obligations.

2. Information Available To Acquiring Agency

The next steps are statutory requirements of the purchaser, but can be undertaken in conjunction with the environmental professions pursuant to CFR sections 312.20(a)(2) and 312.22(a)(1)-(4).61 Under those sections, the entity must first investigate whether there are any “environmental cleanup liens against the subject property that are filed or recorded under federal, tribal, state, or local law.”62 The entity must then provide this information to the environmental professional.63

59 40 C.F.R. § 312(b)(5). 60 40 C.F.R. § 312.10(b)(2)(i)-(iv). 61 40 C.F.R. § 312.20(a)(2) (citing 40 C.F.R. § 312.22) 62 40 C.F.R. § 312.22 63 40 C.F.R. § 312.22(a)

74 Second, the entity must inform the environmental professional if it has any specialized knowledge of the subject property, or the surrounding properties, that will help identify “conditions indicative of releases or threatened releases at the subject property.”64

Third, the entity must consider whether the purchase price of the subject property “reasonably reflects the fair market value of the property, if [it] were not contaminated.”65 The CFR does not provide guidance for assessing this measure. Furthermore, no case law has cited to this section for assessing this reasonableness standard. As a result, it is unclear whether an entity is required to undertake a real estate appraisal, or if the environmental professional may conduct an informal appraisal.

Nonetheless, the CFR places the burden upon the entity to ensure that price differentials are not a result of contamination. It provides: “[p]ersons who conclude that the purchase price of the subject property does not reasonably reflect the fair market value of the property . . . must consider whether or not the differential in purchase price and fair market value is due to the presence of releases or threatened releases of hazardous substances.”66

PRACTICE TIP: If the purchase price does not reflect fair market value, investigate and document why that is the case.

Fourth, the entity will need to obtain “commonly known or reasonably ascertainable information about the subject property.”67 As the CFR provides, entities acquiring property “must take into account commonly known or reasonably ascertainable information within the local community about the subject property” and determine whether such information provides sufficient indications of releases or threatened releases.68

64 40 C.F.R. § 312.22(a)(2)(citing 40 C.F.R. § 312.28). 65 40 C.F.R. § 312.22(a)(3) (citing 40. C.F.R. § 312.29). 66 40 C.F.R. § 312.29(b). 67 40 C.F.R. §312.22(a)(4) (citing 40 C.F.R. §312.30). 68 40 C.F.R. § 312.30

75 3. Interviews With The Past And Present Owner Of The Property

First, the CFR requires an environmental professional to conduct interviews with past and present owners of the property.69 Interviewing past and present owners serves three purposes: (1) to identify conditions indicative of releases or potential releases;70 (2) to meet the CFR’s requirements; and (3) to determine whether there are potential “data gaps” in available information that may be required for compiling a complete analysis.71 That is, this stage of the investigation requires that the environmental professional “[r]eview and evaluate the thoroughness and reliability of the information gathered.”72

In addition, the environmental professional must interview one or more of the following persons: (1) current and past facility managers with relevant knowledge of uses and physical characteristics of the property; (2) past owners, occupants, or operators of the subject property; or (3) employees of current and past occupants of the subject property.73

Under ASTM Standard E1527-13, the interviews must be conducted by a person “possessing sufficient training and experience necessary to . . . identify issues relevant to [RECs] in connection with the property.”74 Moreover, the interviewer may rely upon the truth of information provided unless he or she has “actual knowledge that certain information is incorrect.”75

PRACTICE TIP: ASTM Standard E1527-13(11) requires the AAI investigation to include interviews with state and local government officials.76 That is, “[a] reasonable attempt shall be made to interview at least one staff member”77 from the following: (1) the fire department that serves the property; (2) the state or local health agency; (3) the local hazardous waste disposal agency; and (4) the local agency responsible for building permits.78

69 See 40 C.F.R. § 312.20(b)(1)(citing 40 C.F.R. § 312.23(a)). 70 40 C.F.R. §312.23(a) (citing 40 C.F.R. § 312.20(e)). 71 40 C.F.R. § 312.20(f)(2). 72 40 C.F.R. § 312.20(f)(2). 73 40 C.F.R. § 312.23(c)(1)-(3). 74 ASTM E1527-13(7.5.1). 75 Id. at 7.5.2.1 76 ASTM E1527-13(11) 77 Id. at (11.5.1). 78 Id. at (11.5.1)-(11.5.1.4).

76 4. Review Federal, State, And Local Government Records And Search For Recorded Environmental Liens

The AAI investigation requires a substantial review of governmental records to determine whether there is evidence of past releases or threatened releases on or near the property being acquired. Most importantly, all “[f]ederal, tribal, state, and local government records of the subject property and adjoining properties” must be reviewed.79 Essentially, the purpose of reviewing records is to identify the “historical use” of the property and the “likelihood of past uses having led to RECs in connection with the property.”80

The new ASTM Standard E1527-13 advises that the investigation include an analysis of whether there have been any historic or controlled RECs on the property.81 This means that the entity or environmental professional must inquire into whether “a past release of any hazardous substances . . . has occurred in connection with the property.”82

The entity or environmental professional must investigate whether there are any recorded environmental cleanup liens on the property that are filed or recorded under federal, tribal, state, or local law.83

PRACTICE TIP: There is some conflict as to whether these requirements have to be completed within a year of the purchase or within 180 days. To be on the safe side, make sure that this has been done within six months of closing.

5. Visual Inspections Of The Subject And Adjoining Properties

The environmental professional must undertake “sight reconnaissance”,84 or visual inspection of the property, with special attention paid to areas where hazardous substances were

79 40 C.F.R. § 312.26(a). 80 ASTM E1527-13(8.3.1). 81 See Id. at (3.2.42). 82 Id. 83 40 C.F.R. § 312.25(a)-(b) 83 40 C.F.R. § 312.25(a)-(b); 40 C.F.R. § 312.20(3) (citing 40 C.F.R. § 312.25(a)) 84 ASTM E1527-13 (9).

77 or might have been stored. 85 In addition, any physical limitations in inspecting the property must be noted in the environmental professional’s report.86

6. Vapor Encroachment

In addition to the requirements codified in the CFR, the EPA’s recent adoption of a Final Rule amending the standards and practices to allow ASTM Standard E1527-13 as an acceptable alternative to the CFR’s AAI standard.87 Under this new standard, an entity must analyze “vapor releases, or the potential presence or migration of vapors associated with hazardous substance[s].”88 That is, in conducting an AAI investigation under the ASTM standard, environmental professionals must consider whether there are conditions indicative of hazardous vapor releases from or onto the property.

7. Written Report And Environmental Professional’s Declaration

Finally, all of the above described information must be included in the written report prepared and signed by the environmental professional in compliance with Section 312.21. The report must have the following three elements: (1) an opinion as to whether the AAI investigation has identified conditions indicative of releases or threatened releases of hazardous substances;89 (2) identification of data gaps in the information that affect the ability of the environmental professional to identify conditions indicative of releases or threats of releases;90 and (3) the qualifications of the environmental professional.91

85 40 C.F.R. § 312.20(b)(4); 40 C.F.R. § 312.27(a)(1). 86 Id. 87 See Id. at 79331. 88 Id. at 79332 89 40 C.F.R. § 312.21(c)(1). 90 40 C.F.R. § 312.21(c)(2). 91 40 C.F.R. § 312.21(c)(3).

78 IV. Phase II Environmental Site Assessment Procedure

As discussed above, the “purpose of a Phase I ESA is to identify . . . [RECs] in connection with the property.”92 If a REC or the potential for a REC is discovered during the Phase I investigation, a Phase II ESA may be required to understand the nature and extent of the environmental issues. Phase II ESAs are governed by ASTM Standard E1903-11, which specifies procedures to be used to characterize property conditions using the scientific method in “an objective, representative, reproducible, and defensible manner.93 The purpose of conducting the Phase II analysis is to obtain scientifically valid data concerning property conditions.94 As a result, the scope of the investigation conducted will vary depending upon the specific contamination or threat of contamination involved.

A Phase II analysis should be conducted by a “Phase II Assessor.”95 To qualify as a Phase II Assessor, the person must meet the requirements of an “environmental professional,” as defined above.96

To comply with ASTM standards, the following elements must be included in the written report97 following the on-site activities: (1) statement of the objectives of the analysis;98 (2) formulation of the questions to be answered by the Phase II ESA;99 (3) identification of the areas warranting investigation;100 (4) development of a conceptual model describing the target analytes (potential hazardous substances that may contaminate the site);101 (5) plan for the sampling and chemical testing;102 (6) carry out the sampling and chemical testing;103 (7) validation of the conceptual model by corroborating the results104; and (8) the results of the Phase II ESA.105

92 ASTM E1527-13(7.1) 93 Id. at (1.1). 94 Id. at (1.1.2). 95 See Id. at (7). 96 Id. at (3.1.33). 97 Id. at (6.4.8). 98 Id. at (5.1.1). 99 Id. at (6.4.1). 100 Id. at (6.4.2). 101 Id. at (6.4.3)(citing (3.1.50)). 102 Id. at (6.6.4). 103 Id. at (6.4.5). 104 Id. at (6.4.6). 105 Id. at (6.4.7).

79 PRACTICE TIP: While the Phase II report is far more technical than the Phase I report, experienced counsel should still review it on behalf of the acquiring agency to make sure that it includes all the required elements to meet the AAI standard. Additionally, the nature and extent of the contamination should be considered in evaluating or renegotiating the purchase price and whether the agency will move forward with the acquisition. Lastly, the results of the Phase II must be considered to ensure that the agency is handling the environmental issues with due care.

V. Conclusion

To be sure, the environmental due diligence process can be complicated. By making sure that it is complete, before acquiring property, acquiring agencies can help shield themselves from potentially enormous liability under federal and state environmental laws.

Urban Redevelopment and Assembly Bill 440 – the “New” Polanco Act

Thursday, September 4, 2014 General Session; 8:00 – 9:30 a.m.

Leah S. Goldberg, Senior Deputy City Attorney, San Jose

81 Notes:______

82 NEW OPPPORTUNITIES FOR BROWNFIELDS CLEANUP THE GATTO ACT By Leah Goldberg Senior Deputy City Attorney, City of San Jose Statutory Background From the 1960s through the 1980s, Congress sought to address degradation of the nation’s air and water by enacting the Clean Water Act and the Clean Air Act. In response to Times Beach and Love Canal, whereby single family homes were built on former toxic waste dumps resulting in increased birth defects and cancer clusters, Congress enacted the Resource Conservation and Recovery Act,1 mandating cradle to grave management of hazardous wastes, and the Comprehensive Environmental Response Compensation and Liability Act1 (“CERCLA;” commonly referred to as the “Superfund”) to address cleanup of hazardous substances. Congress intended for polluters to pay for cleaning up hazardous substances. Congress defined the term “polluter” broadly to include owners and operators at the time of the release, current owners, anyone who arranged for the disposal of hazardous substances and transporters. Additionally, the liability is “joint and several” meaning that one party can be responsible for cleaning up the entire problem regardless of the extent of that party’s culpability.1 Given this draconian liability scheme, it is no wonder that developers shy away from contaminated properties and even those properties perceived to be contaminated. “Brownfields” are abandoned, idle or underutilized industrial properties the redevelopment of which is complicated by real or perceived environmental contamination. Brownfields are the result of the aggressive liability scheme in the federal and state environmental laws. Since 1990, several states and ultimately Congress have enacted legislation to address brownfields and entice developers to reuse urban, infill properties. In 2013, the California Legislature adopted AB 440 to fill one of the holes left with the elimination of redevelopment agencies. While the State intended to fill its budget gap by redirecting tax proceeds to the State and other taxing agencies, elimination of redevelopment agencies effectively withdrew one of the most powerful brownfields tools, the Polanco Redevelopment Acti (Polanco Act). The Polanco Act authorized redevelopment agencies to compel cleanup in redevelopment project areas and recover the full costs of cleanup, including attorney’s fees and staff costs, from recalcitrant responsible parties. It also granted legal immunity to the redevelopment agency, the redeveloper, and lenders for hazardous substances releases cleaned up under an approved cleanup plan. The Polanco Act is still a valid law, but now can only be used if a redevelopment successor agency has an enforceable obligation mandating cleanup of a specific property in a former redevelopment project area and the funding for the cleanup, or at the very least, the regulatory

83 oversight costs, have been approved by the Department of Finance as appropriately on the Recognized Obligation Payment Schedule. Otherwise, the law has no further application. Meanwhile, contamination or the threat of contamination still serves as a blighting influence in many California communities because of the fear that contamination can derail development timelines and financial projections. The resulting brownfields serve as a catalyst for community degradation. Even if a developer wants to reuse contaminated property, in the post-recession real estate market, finding a lender to loan on the project can be challenging. Brownfields Solutions The solution to the brownfields problem comes in two forms. The first is monetary relief in the form of grants and loans or tax credits that alleviate the financial burden associated with cleaning up contamination. The second is addressing the liability. The Polanco Act sought to address the liability concern by providing immunities for the redevelopment agency, the redeveloper and its lender. It also addressed the costs of cleanup by providing powerful cost recovery tools to recover not only the cost of cleanup from recalcitrant parties, but also attorneys’ fees and staff costs. Assembly Bill (AB) 440, unofficially known as the “Gatto Act,” became effective on January 1 of this year and provides local agencies -- including cities, counties and successor housing authorities -- with a tool similar to the Polanco Act. In sponsoring AB 440, Assemblymember Gatto recognized that blight in the form of contaminated properties remains a critical issue in the wake of redevelopment dissolution. He also realized that to be meaningful, the Polanco Act model needed to be available on a broader scale to cities, counties and housing authorities, rather than just to redevelopment successor agencies. As a result, the Gatto Act provides many of the same benefits as the Polanco Act. It provides California cities and other local agencies (namely counties and successor housing authorities) with the authority to compel cleanup of contaminated properties. As a result, cities can employ the Gatto Act anywhere within their jurisdictions,ii thus expanding this powerful tool for use nearly statewide. This expansion of the Polanco authority raised some concerns in the Governor’s office leading to a series of amendments. The differences between the Polanco Act and the Gatto Act can be a trap for the unwary. But first, a discussion of the similarities. The Polanco Act Compared To The Gatto Act Procedurally, both laws utilize a process much like nuisance abatement. Before the city can take action to clean up property, it must give the responsible partyiii the opportunity to clean it up. If the responsible party fails to respond or fails to clean up the property in compliance with an agreed-upon schedule, the city can enter onto the property, conduct the site investigation and clean up and sue to recover its costs. Like the Polanco Act, the Gatto Act provides the following benefits for cities:

84 • It allows cities to require landowners to turn over environmental assessment informationiv; • it provides immunities to the city, the redeveloper and its lenders for any release or releases of environmental contaminants addressed in an approved cleanup planv; • it provides extensive cost recovery provisions that include recovery of city staff time and attorneys’ fees in addition to the actual cleanup costs vi; • it can be used to cleanup petroleum contaminationvii; • the city does not have to undertake the cleanup can “cause” a third party to do the workviii; and • the city can take title to the property during the cleanup without entering into the chain of liabilityix. Although the Legislature stated its intentions that the Gatto Act serve as the policy successor to the Polanco Act, and that existing case law used to interpret the Polanco Act be used to interpret the Gatto Actx, the two laws are not identical. First, the terminology in the Gatto Act differs from the Polanco Act. Instead of referring to a “remedial action plan,” the Gatto Act refers to a “cleanup planxi.” The Gatto Act also uses the definition of “hazardous materialsxii” instead of “hazardous substances.” And the law added definitions of “blighted areaxiii,” “blighted propertyxiv,” “investigationxv,” “investigation planxvi”, “phase I investigationxvii” and “phase II investigationxviii.” Unlike the two-part definition of blight under the former redevelopment law, the definition of “blighted area” for the purposes of the Gatto Act is defined as “an area in which the local agency determines there are vacancies, abandonment of property, or a reduction or lack of proper utilization of property, and the presence or perceived presence of a release or releases of a hazardous material contributes to the vacancies, abandonment of property or reduction or lack of proper utilization of property.”xix By design, the definition to a large extent mimics the definition of a brownfield under federal lawxx. Before giving notice to the responsible party to investigate and clean up a property, however, the city must find that the property is a blighted property in a blighted area. This finding was not required under the Polanco Act because that law was only available for use in redevelopment project areas. Redevelopment agencies had already found that the properties were blighted when they put the properties into the project areas, thus avoiding the need to make a separate blight finding when using the Polanco Act. The Gatto Act also has some limitations not found in the Polanco Act. For example, when properties are already under regulatory oversight, the city must meet and confer with the appropriate regulatory agency before employing the statutexxi. The regulatory agencies were concerned that a City could interfere with ongoing regulatory oversight. However, if the responsible party has entered into a Voluntary Cleanup Agreement with the Department of Toxic Substances Control (“DTSC”) and the city and DTSC cannot agree on the city’s use of the Gatto

85 Act, the Lead Agency Designation Committee, sitting without the DTSC representative, serves as the neutral arbiterxxii. Importantly, the Gatto Act does not require consistency with the National Contingency Plan, which is the Superfund process for cleaning up properties under federal law. Since the court in Redevelopment Agency of the City of San Diego v. Salvation Armyxxiii held that strict compliance with the National Contingency Plan was not a requirement for cost recovery, the purpose of the Polanco Act’s National Contingency Plan consistency requirement was confusing. Accordingly, the Gatto Act replaced this obligation with robust public participation requirementsxxiv. Concerned that some overzealous local agency’s staff might use the Gatto Act to harass property owners, the Legislature provided a right to appeal the notice to clean up the property. The responsible party has 30 days to appeal the responsible party determination to the City Council. The appeal period stays the other timelines in the Gatto Act until the appeal is heard, but any challenges to the legislative body’s determination can only be made in the cost recovery action following the cleanupxxv. Additionally, several procedural differences exist between the Polanco Act and the Gatto Act. First, the Gatto Act does not require the city to request cleanup guidelines. Second, regulatory oversight occurs much earlier when using the Gatto Act. Regulatory oversight commences at the site investigation stage rather than later at the cleanup plan stagexxvi. If the property is not fully characterized, meaning that the lateral and vertical extent of the contamination is not fully demarcated, the responsible party or the city submits an investigation plan to the applicable regulatory agency for review and approval. Two Polanco Act cases, one published and one unpublished, established that failure to comply with the notice requirements bar cost recovery.xxvii While the regulatory agencies would prefer that their oversight commence at the investigation stage, hopefully the courts will not extend this body of case law to the obligation to give notice to compel a site investigation. Because a drawn-out site investigation can stall the reuse of the property, regulators must review the investigation plan within 30 days of receiptxxviii. Following the investigation in accordance with an agreed upon schedule, the responsible party has 60 days to prepare a cleanup planxxix. Other notable differences between the Gatto Act and the Polanco Act include:

1) A right of entry for the city to conduct site investigation or cleanupxxx. Under redevelopment law, redevelopment agencies could use eminent domain law to access property to conduct environmental site assessments. Because cities cannot use eminent domain for economic development, the statute grants a right of entry. 2) The Gatto Act provides authority for the city to make the initial determination whether a cleanup plan is acceptable based on the intended use of the property and the development timelinexxxi.

86 3) In response to the legislative mandate for DTSC to recover its costs, more detail on the obligation of the city or the responsible party to pay oversight costsxxxii was included in the statutory language. 4) And the Gatto Act cleaned up the language relating to the conditional immunities letters that are issued concurrently with the cleanup plan approvalxxxiii. Undeniably, the most significant difference between the Polanco Act and the Gatto Act, however, is not statutory, but structural. Former redevelopment agencies could float bonds secured against future tax increment to pay for cleanup costs. Cities currently do not have that option. Instead cities must use scarce general fund money or money from developers who agree to fund the work. This may result in greater emphasis on the cost recovery provisions in the new law. In the years immediately following promulgation of the Polanco Act, some regulatory agencies were apprehensive about overseeing cleanups that would result in certain parties gaining immunities. However, with the enactment of AB 440, the regulatory community (DTSC and the Water Boards in particular) has immediately focused on how to work with cities and other local agencies to implement the statute. Shortly after Governor Brown signed the new law, DTSC convened a meeting with Water Board representatives, EPA and the attorneys who worked on AB 440 with Assemblyman Gatto, to discuss its implementation. Both DTSC and the Water Boards are now considering standard oversight agreements with cities—similar to the environmental oversight agreements former redevelopment agencies used with DTSC. The regulators have requested that sites be assigned to the regulatory agency through the EPA brownfields “MOA” processxxxiv. The regulators also suggested that, especially for time-critical clean ups, the city serve as lead agency for CEQA compliance purposes. Conclusion The loss of redevelopment will be felt by Californians in many ways as the tools that served to revitalize our urban landscapes no longer exist. Despite concerns about the lack of upfront funding to initiate clean up, the Gatto Act restores authority for municipalities to compel cleanup of contaminated properties. Overall it provides cities a new, but familiar tool, to combat blight throughout the state.

i Health & Safety Code section 33459 et seq. ii Health & Safety Code section 25403.1(a)(1)(A). iii For the definition of responsible party see, Health & Safety Code section 25323.5(a) or Water Code section 13304(a). iv Health & Safety Code section 25403.1(f). v Health & Safety Code sections 25403.2(c) and 25403.3. vi Health & Safety Code section 25403.5. vii Health & Safety Code section 25403(i). viii Health & Safety Code sections 25403.2(a)(1) and 25403.6. ix Health & Safety Code section 25403.6(a).

87 x Health & Safety Code section 25403.8. xi Health & Safety Code section 25403(c). xii Health & Safety Code section 25403(i). xiii Health & Safety Code section 25403(a). xiv Health & Safety Code section 25403(b). xv Health & Safety Code section 25403(j). xvi Health & Safety Code section 25403(k). xvii Health & Safety Code section 25403(n). xviii Health & Safety Code section 25403(o). xix Health & Safety Code section 25403(a). xx 42 USC section 9601 (39). xxi Health & Safety Code section 25403.1(a)(1)(B) and (C). xxii Health & Safety Code section 25403.1(a)(1)(C). xxiii 103 Cal.App.4th 755 (2002). xxiv Health & Safety Code section 25403.7.

xxv Health & Safety Code section 25403.1(b)(3)(C). xxvi Health & Safety Code section 25403.1(a)(2). xxvii Anaheim Redevelopment Agency v. Union Pacific Railroad, Cal. App.,Unpub. Lexis 5566 (2003); See also, Redevelopment Agency of the City of Stockton v. Burlington Northern & Santa Fe Railway Corp., 2007 U.S. Dist. LEXIS 44287 (2007). xxviii Health & Safety Code section 25403.1(a)(3). xxix Health & Safety Code section 25403.1(b)(2)(A). xxx Health & Safety Code sections 25403.1(a)(1)(A) and 25403.1(f)(2). xxxi Health & Safety Code section 25403.1(b)(2)(B)(i) and (ii). xxxii Health & Safety Code section 25403.4. xxxiii Health & Safety Code section 25403.1(a)(5). xxxiv The MOA was developed by CalEPA to avoid forum shopping between regulatory agencies. Anyone wanting regulatory oversight of a brownfield fills out an application. DTSC and the Water Boards meet to review and discuss the applications and assign the sites to the regulatory agencies taking into account factors such as end use of the property, the potential impacts to ground or surface waters, the capacity of the agencies and whether there was any past regulatory action and if so, by which agency.

Regulatory Issues Related to Brownfield Remediation

Thursday, September 4, 2014 General Session; 8:00 – 9:30 a.m.

Barbara J. Cook, Division Chief, Brownfields & Environmental Reuse Program, California Department of Toxic Substances Control

89 Notes:______

Due to circumstances beyond our control, this paper must be obtained individually by visiting www.cacities.org/cle.

This page left intentionally blank.

FPPC Update

Thursday, September 4, 2014 General Session; 11:00 a.m. – 12:00 p.m.

Shawn M. Mason, City Attorney, San Mateo

93 Notes:______

94 FPPC UPDATE- AMENDMENTS TO THE REGULATIONS

Prepared by

Shawn M. Mason City Attorney City of San Mateo

INTRODUCTION

This paper provides an update on significant developments relating to the Political Reform Act of 1974 (California Government Code section 81000 et seq.) and the activities of the Fair Political Practices Commission ("FPPC") in interpreting and applying the Act. This update addresses developments from April 2014 through August 2014.

I. LEGISLATION

There have been no amendments to the provisions of the Act concerning conflicts of interest, gifts, or disclosure of financial interests during the period covered by this paper.

II. AMENDMENTS TO THE FPPC REGULATIONS

Regulation 18705.2 Materiality Standards for Real Property Conflicts

What has changed?:

On April 14, 2014, the Commission adopted amendments to the regulations that significantly change the approach for determining when financial impacts on an official’s real property interests will be deemed “material.”

The previous regulations analyzed real property conflicts in a two-step process. The first step was to determine if the official's property was "directly" or "indirectly" involved in the decision. Former Regulation 18704.2 (a) described a number of different types of decisions, and provided that if the official's property was the subject of one of those types of decisions, the property was deemed to be “directly” involved in the decision. In addition, subsection (a)(1) described a rule based upon the proximity of the official's property in relation to other property that was the subject of the decision. If the official's property was within 500 feet of the subject property, the official's property was deemed to be "directly" involved in the decision. If the official's property did not fall within any of the circumstances described in subsection (a), the official's property was considered to be "indirectly” involved in the decision.

The second step in the process was described in former section18705.2. If the official's property was directly involved in the decision, the effects of the decision were presumed to be material. If the official's property was indirectly involved in the decision, this gave rise to a presumption that any effect on the official's property would not be material. The previous regulation provided that both of these presumptions were rebuttable, and set forth factors that should be considered in determining whether the presumptions were rebutted in a particular case.

In April, the Commission repealed former Regulation 18704.2, and adopted a revised Regulation 18705.2. Together these actions made a number of substantive changes to the standards, as well as changing the process for analyzing real property conflicts. These changes include:

The Elimination of the Direct/Indirect Framework

Former Regulation 18704.2 contained the rules for determining whether the official’s real property interests were directly or indirectly involved in the decision. This regulation has been repealed, and this step has been removed from the analytical process. Now, each decision must be analyzed by applying the factors listed in revised Regulation 18705.2.

The New “500 foot” Rule

Under the previous regulations, if the official’s property was located within 500 feet of property that was the subject of a governmental decision, the financial impacts of the decision on the official’s property were presumed to be material. However, this presumption could have been rebutted if it could be shown that the decision would not have any impact on the value of the official’s property. This was known as the “one penny rule.”

The 500 foot presumption and the one penny rule have been carried over in the new regulation; however, an important procedural requirement has been added. Before, an official who believed a decision would have no impact on the value of their property could simply act on the matter. Now, an official whose property is located within 500 feet of property that is the subject of a governmental decision may not participate in the decision, unless they have received written advice from the FPPC that the decision will have no measureable impact on the value of the official’s property.

The New “Reasonably Prudent Person” Standard

The previous regulations listed a number of factors to consider in determining whether the value of the official’s property would likely be impacted by a particular governmental decision. In general, these rules focused on whether the official’s property was the subject of the decision, or on the proximity of the official’s property to the property that was the subject of the decision. If the official’s property was the subject of the decision, or was close to the

96 subject property, a presumption of “materiality” arose. These standards have been carried forward into the new regulation; however, another catch all standard has been added. Now, even if the official’s property is not the subject of the decision, or is located well beyond 500 feet from the subject property, the official must consider whether “…a reasonably prudent person, using due care and consideration under the circumstances, [would] believe that the governmental decision was of such a nature that its reasonably foreseeable effect would influence the market value of the official’s property.”

The New Rules for Business Properties

Under the previous regulations, if an official’s real property was occupied by a business entity in which the official also had an interest, the effects of the governmental decision on the property and the business would both have to be considered. Under the new regulation, the effects of the decision on the official’s real property interest do not have to be considered when the decision involves the issuance of a permit or entitlement, or when one is considering the impact of the decision on the income producing potential of the property. When applying those factors, only the impacts on the official’s business entity interest are to be considered.

The New Rules for Leasehold Interests

The analysis for evaluating impacts on an official’s leasehold interests in real property has been simplified. Under the previous regulations the two step direct/indirect framework was used to determine whether materiality would be presumed, and then a number of factors were to be considered to determine whether the presumption could be rebutted. Now, when considering the impact of a decision on a leasehold interest, one simply considers the listed factors. A result of this change is that the 500 foot rule no longer applies as a bright line test to leasehold interests.

New Rules on Interests in Common Area

Under the previous regulations, no special consideration was given to an official’s undivided interest in common area in a common interest development. This had the effect of raising doubts about whether an official could participate in a decision in which common area was located within 500 feet of a subject property, even if the official’s unit was located well beyond 500 feet. The new regulation eliminates this problem by redefining the term “real property in which an official has an interest” to exclude an official’s undivided interest in common area.

Significance:

Real property conflicts of interest are the most commonly encountered issues for local officials. While most of the substance of the previous real property regulations have been carried over to the new regulation, important changes have been made that must be considered by city attorneys in giving advice on these questions. In particular, city attorneys must be sure to apply

97 the new “reasonably prudent person” standard, and carefully consider whether the circumstances warrant seeking advice from the FPPC on the application of that standard.

Regulations 18700.3 and 18703.1 Parent, Subsidiary and Otherwise Related Business Entities

What has changed?:

The Act prohibits public officials from participating in government decisions in which they have a private, financial interest. The Act lists the “interests” that must be considered in applying this prohibition. Among these is “any business entity in which the public official has a direct or indirect investment.” Thus, to determine if an official has an interest in a particular business entity, one must determine if the official has an investment in the entity.

Government Code section 82034 defines “investment” for the purposes of the Act. It defines the term, in relevant part, as “a financial interest in or security issued by a business entity, …if the business entity or any parent, subsidiary, or otherwise related business entity has an interest in real property in the jurisdiction, or does business or plans to do business in the jurisdiction, or has done business within the jurisdiction at any time during the two years prior to the time any statement or other action is required under this title.” (Emphasis added.)

By these terms, if a business entity in which an official has an interest does not have the contacts with the official’s jurisdiction described above, it is not considered an “investment” under the Act. If it is not an investment, then the official’s investment in the entity would not be deemed an economic interest that must be considered in applying the provisions of the Act.

To determine whether an entity has sufficient contacts with an official’s jurisdiction, one must determine whether the entity, or “a parent, subsidiary, or otherwise related business entity” has the specified contacts with the jurisdiction. Section 82034 does not define this phrase, but directs the Commission to do so.

Somewhere along the way, defining this phrase went in a different direction. Regulation 18703.1 was drafted to not only define “parent, subsidiary, or otherwise related entity,” but also to declare that “business entity interests” include entities that are parents of, subsidiaries of, or are otherwise related to, entities in which an official has invested. The effect of this regulation was to greatly expand the scope of an official’s interests. When analyzing whether a decision will financially impact an official’s business entity interests, this regulation requires that one consider not only the impacts of the decision in which the official actually invests, but also, the impacts on all parent, subsidiary, and other entities that are related to that entity.

On July 17, 2014, the Commission adopted amendments to the regulations to correct this problem. These amendments make two changes to the previous rules. First, they repeal the regulation that states that an official has an economic interest in a business entity which is a parent of, or subsidiary of, or is otherwise related to, a business entity in which the official owns an investment interest. The amendments also revise the definition of an “otherwise

98 related business entity.” The new definition removes ambiguous, difficult to apply terms, and replaces them with a more straightforward approach. Essentially, “an otherwise related business entity” is characterized by overlapping ownership or control between entities.

Significance:

These amendments resolve an inconsistency between the regulations and the Act, and will greatly simplify the analytical approach to potential business entity conflicts of interests.

III. REGULATION CLARIFICATION PROJECT

FPPC staff continues to work on the project to improve and clarify the FPPC regulations. Having revised the materiality standards for real property conflicts, FPPC staff will now consider the materiality standards for business entity interests.

IV. OTHER DEVELOPMENTS

In February 2011, Governor Brown appointed Ann Ravel as Chair of the FPPC. Chair Ravel brought experience as a local government attorney to the position, and worked to involve local government attorneys and other stakeholders in efforts to improve FPPC regulations. In 2013, Ms. Ravel was appointed to the Federal Elections Commission.

On April, 23, 2014 Governor Brown appointed Jodi Remke as Chair Ravel’s successor. Chair Remke previously served as presiding judge of the State Bar Court of California.

This page left intentionally blank.

100

Police Officer or Deputy City Attorney as Whistleblower

Thursday, September 4, 2014 General Session; 11:00 a.m. – 12:00 p.m.

James “Jeb” E. Brown, Supervising Deputy City Attorney, Riverside

101 Notes:______

102

WHISTLEBLOWER ACTIVITY – IDENTIFY IT AND RESPOND APPROPRIATELY

I. INTRODUCTION

Public policy favors protecting individuals that report allegations of official wrongdoing including fraud, corruption, theft and misuse of government property, abuse of authority, and other unlawful conduct including harassment and discrimination at the workplace. Accordingly, the State and federal legislatures have enacted laws and regulations that protect whistleblowing activities. State and federal whistleblower laws and regulations assist in ensuring the health and safety of employees at the workplace, and promote the freedom of speech of employees in certain situations.

There are serious consequences for employers who retaliate against employees for their whistleblowing activities.1 When a plaintiff employee prevails in a whistleblower action, the defendant employer can be liable for litigation costs, compensatory damages, reasonable attorneys’ fees, punitive damages2, civil penalties3 and/or imprisonment.4 Accordingly, it is important for agencies to carefully evaluate the facts to determine whether the public employee engaged in whistleblower activity, and respond appropriately.

When a public employee speaks as a private citizen on a matter of public concern, he/she may be engaging in protected speech. If the public employee reports unlawful conduct to an individual outside his/her chain-of-command, the employee likely engaged in protected activity.

It can be particularly difficult to ascertain whether a public employee is merely carrying out his/her job duties versus engaging in protected activity when there is an apparent nexus between the employee’s job duties and his/her whistleblowing activity. This is especially true in the case of employees whose jobs are law related. For example, a police officer who reports that a corrections officer is mistreating a prison inmate may or may not be engaging in protected speech; it depends on the facts. Similarly, an in-house city attorney who reports that the City Clerk added unauthorized line items to the budget and issued payments for such items may or may not be engaging in protected activity.

This article will explore the legal issues surrounding whistleblower claims by agency counsel and peace officers. It will also discuss some of the complexities that may arise in defending suits by these employees, including the potentially central role

1 California False Claims Act (Gov. Code, §12650 et.seq.); Lab. Code, § 1102.5. 2 Gov. Code, § 12653(b). 3 Lab. Code, §1102.5(f). 4 Lab. Code, §1103. 1 Document #838720 103

that privileged communications may play in a claim by agency counsel against his or her employer/ client.

II. RECOGNIZING WHISTLEBLOWER ACTIVITIES

California employers and management should be familiar with the State whistleblower statutes so that they can recognize whistleblower activities and respond appropriately.

A. State Whistleblower Statutes

1. California Labor Code § 1102.5 (amended effective January 1, 2014)

Labor Code section 1102.55 prohibits an employer from retaliating against an employee who reports any violation of a federal or State statute or regulation, or any violation or non-compliance with a local rule or regulation, as long as the employee reasonably believes that the violation or non-compliance has occurred. It is irrelevant that the report or disclosure is part of the employee’s normal job duties.

Under the amended statute, the employee may report the violation or noncompliance to (1) an individual with authority over the employee, (2) an employee that is authorized to investigate, discover or correct the violation or non-compliance, or (3) a public body that conducts an investigation, hearing or inquiry.

2. California Occupational Safety and Health Act of 1973 (“Cal/OSHA”)

5 “(a) An employer, or any person acting on behalf of the employer, shall not make, adopt, or enforce any rule, regulation, or policy preventing an employee from disclosing information to a government or law enforcement agency, to a person with authority over the employee, or to another employee who has authority to investigate, discover, or correct the violation or noncompliance, or from providing information to, or testifying before, any public body conducting an investigation, hearing, or inquiry, if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee's job duties.”

“(b) An employer, or any person acting on behalf of the employer, shall not retaliate against an employee for disclosing information, or because the employer believes that the employee disclosed or may disclose information, to a government or law enforcement agency, to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance, or for providing information to, or testifying before, any public body conducting an investigation, hearing, or inquiry, if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee's job duties.”

“(c) An employer, or any person acting on behalf of the employer, shall not retaliate against an employee for refusing to participate in an activity that would result in a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation.” (Lab. Code, §1102.5.)

2 Document #838720 104

The California Occupational Safety and Health Act of 1973 (“Cal/OSHA”; Lab. Code, § 6310 et. seq.) prohibits an employer from retaliating against an employee for complaining about unsafe working conditions or practices, or for participating in an employer-employee occupational health and safety committee.6

3. California Fair and Employment Housing Act (“FEHA”)

The California Fair and Employment Housing Act (“FEHA”; Gov. Code, § 12900 et. seq.) prohibits harassment and discrimination based on an individual’s membership in a protected class, i.e., race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age (over 40 years), sexual orientation, or military and veteran status of any person. (Gov. Code, § 12940(a).)

The FEHA also prohibits employers from retaliating against an applicant/employee because he/she has complained about practices forbidden under FEHA, or because the individual has filed a complaint, testified, or assisted in any proceeding under the FEHA. (Gov. Code, § 12940(h).)

B. Elements of a Whistleblower Claim

A plaintiff employee must establish that he/she engaged in a protected whistleblower activity, his/her employer took adverse employment action, and a legal connection between the whistleblower activity and the adverse action.7

Thus, to establish a prima facie case of retaliation, the employee must report suspected unlawful activity, or oppose an employer’s unlawful practice, or refuse to participate in unlawful activity. Once the employee establishes a prima facie case of retaliation, the employer must show that it had a legitimate, non-retaliatory reason for the action.8 In Mokler v. County of Orange, the Court found the plaintiff, a former county executive director for office on aging, had established a prima facie case of retaliation in violation of Labor Code section 1102.5 where the evidence showed the plaintiff held a reasonable belief that the county engaged in illegal activity by reorganizing the county

6 Labor Code section 6310(a) states: “No person shall discharge or in any manner discriminate against any employee because the employee has done any of the following: (1) Made any oral or written complaint to the division, other governmental agencies having statutory responsibility for or assisting the division with reference to employee safety or health, his or her employer, or his or her representative. (2) Instituted or caused to be instituted any proceeding under or relating to his or her rights or has testified or is about to testify in the proceeding or because of the exercise by the employee on behalf of himself, herself, or others of any rights afforded him or her. (3) Participated in an occupational health and safety committee established pursuant to Section 6401.7.” 7 Mokler v. County of Orange (2007) 157 Cal.App.4th 121, 138; Patten v. Grant Joint Union High School Dist. (2005) 134 Cal.App.4th 1378, 1384; Edgerly v. City of Oakland (2012) 211 Cal.App.4th 1191, 1199. 8 Patten v. Grant Joint Union High School Dist., 134 Cal.App.4th at 1384.

3 Document #838720 105

office without getting prior approval from the State Department on Aging as required by the county’s contract with the State. The plaintiff reported such belief to her supervisors, and her supervisors instructed her not to report the organizational change to the State. The Court further found the county's discharge of the plaintiff was pretextual given her exceptional performance reviews prior to her discharge.9 The “protected” complaint must concern a violation of State or federal law, or violation or non-compliance with local rules or regulations. The “protected” complaint cannot involve only internal personnel matters. In Patten v. Grant Joint Union High School Dist., a school principal (Patten) disclosed to school officials her concern that more staff was needed for safety purposes, that a science teacher made an off-color remark, and a male physical education (P.E.) teacher was peering into the girl’s locker room.10 Patten reported to a state Assembly member, his assistant, and a representative of a state Senator, that she had refused to sign blank “transfer of funds” forms that the school district had requested because there was no way to ensure the reassigned expenditures were legitimate based on II/USP guidelines. Patten was fearful of the legality of such action.11 The Court found that the plaintiff’s disclosures involving the science and P.E. teachers did not amount to whistleblowing as a matter of law because, although the disclosures were made by a government employee (Patten) to a government agency (Grant), the disclosures indisputably encompassed only the context of internal personnel matters involving a supervisor and her employee, rather than the disclosure of a legal violation.12 Patten admitted that she merely forwarded complaints by students of inappropriate conduct of the P.E. teacher to the Assistant Superintendent of Human Resources, District Legal Counsel, and Assistant Superintendent of Educational Services for personnel action.13 Similarly, Patten's disclosure regarding the science teacher was made solely in the context of an internal personnel matter based on a student complaint, rather than in the context of a legal violation. However, there was a genuine issue of material fact concerning whether Patten’s disclosure to legislators concerning the school district's alleged violation of State or federal law regarding a budget constituted whistleblowing.14 Patten reported to the legislators that she had refused to sign blank “transfer of funds” forms because there was no way to ensure the reassigned expenditures were legitimate based on II/USP guidelines, and Patten was fearful of the legality of such action.15

9 Mokler v. County of Orange (2007) 157 Cal.App.4th 121,139. 10 Patten v. Grant Joint Union High School Dist., 134 Cal.App.4th at 1382. 11 Patten v. Grant Joint Union High School Dist., 134 Cal.App.4th at 1382. 12 Patten v. Grant Joint Union High School Dist., 134 Cal.App.4th at 1384-1385. 13 Patten v. Grant Joint Union High School Dist., 134 Cal.App.4th at 1385. 14 Patten v. Grant Joint Union High School Dist., 134 Cal.App.4th at 1385-1386. 15 Patten v. Grant Joint Union High School Dist., 134 Cal.App.4th at 1386.

4 Document #838720 106

III. FREEDOM OF SPEECH

When a public employee speaks as a private citizen on matters of public concern, he/she is potentially engaging in speech protected under the First Amendment. Given the serious consequences resulting from retaliation lawsuits, agencies must be able to identify when a public employee’s speech is protected, and respond appropriately. The landmark retaliation case is Garcetti v. Ceballos.16 The United States Supreme Court ruled in Garcetti v. Ceballos that public employees who make statements pursuant to their official duties are not entitled to First Amendment protection.

The plaintiff, Richard Ceballos, worked as a deputy district attorney. He was a calendar deputy, and responsible for investigating charges and preparing filings. In February 2000, a criminal defense attorney told Ceballos there were inaccuracies in an affidavit submitted in support of a search warrant application. The defense attorney informed Ceballos that he had filed a motion to traverse in order to challenge the search warrant and requested Ceballos to review the case. Ceballos researched the issue and determined that the affidavit was inaccurate. Accordingly, Ceballos informed his supervisors about his concerns and prepared a disposition memorandum recommending dismissal of the criminal case. Ceballos' concerns were discussed at a meeting, but his supervisors decided to proceed with the prosecution of the criminal case, pending disposition of the defense motion to traverse.

At the motion to traverse hearing, the criminal defense counsel called Ceballos as a witness. Ceballos testified about his observations regarding the affidavit. The trial court rejected the challenge to the search warrant. Thereafter, Ceballos filed a Section 1983 complaint against the county and his supervisors at the district attorneys' office. He alleged he was subject to adverse employment actions in retaliation for engaging in protected speech where he wrote the disposition memorandum recommending dismissal of the criminal case.17

The U.S. Supreme Court noted there are two inquiries that guide the interpretation of the constitutional protections accorded to public employee speech.18 The first inquiry requires determining whether the public employee spoke as a citizen on a matter of public concern. If no, the employee has no First Amendment cause of action. If yes, the employee may have a possible First Amendment claim. The second inquiry then becomes whether the public employer had an adequate justification for

16 Garcetti v. Ceballos (2006) 547 U.S. 410, 421-422. 17 Garcetti v. Ceballos, 547 U.S. at 421-422. 18 Garcetti v. Ceballos, 547 U.S. at 418, citing Pickering v. Board of Ed. of Township High School Dist. (1968) 391 U.S. 563, 568.

5 Document #838720 107

treating the employee differently from any other member of the general public. The Court noted this second consideration reflects the importance of the relationship between the speaker's expressions and employment. “A government entity has broader discretion to restrict speech when it acts in its role as employer, but the restrictions it imposes must be directed at speech that has some potential to affect the entity's operations.”19

The Supreme Court found Ceballos did not speak as a private citizen about a public concern when, he wrote the disposition memorandum pursuant to his official duties as a calendar deputy. His speech was therefore not protected by the First Amendment.20 Ceballos went to work and performed the tasks he was paid to perform. He acted as a government employee, not as a private citizen. The fact that his duties sometimes required him to speak or write did not prohibit his supervisors from evaluating his performance.

HYPOTHETICAL

Deputy sheriff Paul speaks at a Board of Supervisors meeting about budget cuts. He claims that two recent accidents at the county jail, which involved serious physical injuries, could have been prevented if the budget had not been drastically reduced. Paul states that the Board’s action resulted in the serious injuries.

Did Paul speak on a matter of public concern?

Answer: Yes.

This hypothetical is derived from Westmoreland v. Sutherland where the Sixth Circuit Court of Appeals concluded that the speech was a matter of public concern, the speech was not made only for private interest, and the fact that it occurred as part of a Council meeting suggests it is a matter of public concern. The Court also discussed whether speech has to be “true” in order to enjoy First Amendment protection. The Court held that a public employee is not required to prove the truth of the speech in order to secure the protections of the First Amendment.21

HYPOTHETICAL

Deputy District Attorney Tammy sends a disposition memorandum to dismiss a criminal case against an individual when she learns that the arresting police officer did not book into evidence the entire amount of

19 Garcetti v. Ceballos, 547 U.S. at 418. 20 Garcetti v. Ceballos, 547 U.S. at 421-422. 21 Westmoreland v. Sutherland (6th Cir. 2011) 662 F.3d 714.

6 Document #838720 108

narcotics that she confiscated from the arrestee, and the police officer could not explain why a portion of narcotics was missing. Tammy was later given a written reprimand for her disposition memorandum.

Did Tammy engage in protected speech?

Answer: No, Tammy was simply performing her official duties as the deputy district attorney. HYPOTHETICAL #7

Police Sergeant Henry files grievance against Captain Greg claiming hostile work environment because the captain is “very autocratic, controlling and critical.” His grievance further claims the captain’s approach and tactics were destroying the morale and confidence of the police officers.

Did Henry speak on a matter of public concern, i.e., protected activity?

Answer: No.

In Desrochers v. City of San Bernardino, police officers filed a grievance against their Sergeant for his supervisory methods. The Ninth Circuit Court of Appeals held that there was no public concern and stated that in a “close case, when the subject matter of a statement is only marginally related to issues of public concern, the fact that it was made because of a grudge or other private interest, or to co-workers rather than to the press may lead the court to conclude that the statement does not substantially involve a matter of public concern.”22

IV. DETERMINING WHETHER A POLICE OFFICER’S SPEECH IS PROTECTED.

Agency employers routinely conclude that a police officer who reports fraud or other illegal conduct is simply performing his/her official duties. This conclusion may generally be correct. To avoid the severe consequences resulting from whistleblower lawsuits, however, agencies must promptly identify when a police officer’s speech is protected, and respond appropriately. This is particularly important given recent cases involving police officers who claimed First Amendment retaliation.

In August 2013, the Ninth Circuit Court of Appeals held in Dahlia v. Rodriguez that a Burbank police detective (Dahlia) could assert a First Amendment retaliation claim based on his complaints to his superiors about alleged abusive interrogation tactics at his department. Dahlia had observed Lieutenant Rodriguez grab a suspect and threaten him with a gun. Dahlia claimed that he heard yelling and the sound of

22 Desrochers v. City of San Bernardino (9th Cir. 2009) 572 F.3d 703.

7 Document #838720 109

someone being slapped and hit in a room where Sergeant Peneranda was interviewing a different suspect. Dahlia reported his observations to Lieutenant Murphy who directed Dahlia to "stop his sniveling." Dahlia claimed that he met with Murphy on two additional occasions to complain about abusive tactics, but Murphy did nothing in response to his complaints. Dahlia further claimed that Rodriguez and Peneranda threatened him to not say anything during the Police Department’s investigation.

Dahlia filed a First Amendment retaliation claim alleging that his reports of abusive tactics within the Department resulted in threats, ostracism, denial of employment opportunities, undue scrutiny and malicious statements designed to destroy his reputation. The Ninth Circuit easily found that Dahlia's speech - reporting police abuse and the attempts to suppress its disclosure - was a matter of public concern.23 The Court rejected the argument that California police officers’ duties are unique for purposes of First Amendment retaliation claims. 24The Court gave guidelines for determining whether a public employee’s speech is protected versus part of his/her official duties. First, “whether the employee confined his communications to his chain of command is a relevant, if not necessarily dispositive, factor in determining whether he spoke pursuant to his official duties. When a public employee communicates with individuals or entities outside of his chain of command, it is unlikely that he is speaking pursuant to his duties.”25

Second, the subject matter of the speech at issue is highly relevant. “When an employee prepares a routine report, pursuant to normal departmental procedure, about a particular incident or occurrence, the employee’s preparation of that report is typically within his job duties.”26 On the other hand, “if a public employee raises within the department broad concerns about corruption or systemic abuse, it is unlikely that such complaints can reasonably be classified as being within the job duties of an average public employee,” unless the “employee works for Internal Affairs or another such watchdog unit.” 27 Third, “[W]e conclude that when a public employee speaks in direct contravention to his supervisor’s orders, that speech may often fall outside of the speaker’s professional duties. Indeed, the fact that an employee is threatened or harassed by his superiors for engaging in a particular type of speech provides strong evidence that the act of speech was not, as a ‘practical’ matter, within the employee’s job duties notwithstanding any suggestions to the contrary in the employee’s formal job description.”28 In December 2013, the Ninth Circuit Court of Appeals again analyzed First Amendment rights in the law enforcement context. In Hagen v. City of Eugene, the plaintiff (Hagen) was a police officer for the Eugene Police Department ("EPD"),

23 Dahlia v. Rodriguez (9th Cir. 2013) 735 F.3d 1060, 1067-1068. 24 Dahlia v. Rodriguez, 735 F.3d at 1071. 25 Dahlia v. Rodriguez, 735 F.3d at 1074. 26 Dahlia v. Rodriguez, 735 F.3d at 1074-1075. 27 Dahlia v. Rodriguez, 735 F.3d at 1074-1075. 28 Dahlia v. Rodriguez, 735 F.3d at 1075-1076.

8 Document #838720 110

assigned to the K-9 team.29 Hagen reported departmental safety concerns pertaining to misfires and erroneous explosive detonations of the SWAT team. From 2005 until April of 2008, Hagen directed his complaints to his supervisor, Sergeant Eichhorn, and other departmental sergeants. Hagen identified specific incidents with regard to his safety concerns. In May of 2008, Sergeant Eichhorn informed Hagen that he would be transferred out of the K-9 unit because he was "the spokesman for the majority of the complaints."30 While this initial transfer was rescinded, Hagen began to receive negative performance reviews. He was ultimately transferred from the K-9 unit by Lieutenant Bills. The Police Chief confirmed the transfer decision despite his knowledge that Hagen believed he was being retaliated against for airing his SWAT safety concerns.31 Hagen filed a First Amendment retaliation lawsuit against the city and his supervisors. The Ninth Circuit articulated five factors for determining whether a public employee’s speech is protected by the First Amendment. The five questions are: (1) whether the plaintiff spoke on a matter of public concern;

(2) whether the plaintiff spoke as a private citizen or public employee;

(3) whether the plaintiff's protected speech was a substantial or motivating factor in the adverse employment action;

(4) whether the state had an adequate justification for treating the employee differently from other members of the general public; and

(5) whether the state would have taken the adverse employment action even absent the protected speech.32

The Ninth Circuit found Hagen's speech concerned his employment and safety issues about which EPD officers were required to report as part of the tasks they were paid to perform.33 It also found that Hagen's concerns were directed only to his coworkers and to his superior officers. The Court determined Hagen's speech was in line with a "routine report, pursuant to normal departmental procedures about a particular incident or occurrence," which under the framework set forth in Dahlia, classified Hagen's speech as being within his job duties.34 The Court further concluded, “Hagen had an official duty to report his safety concerns and thus spoke as a public

29 Hagen v. City of Eugene (9th Cir. 2013) 736 F.3d 1251. 30 Hagen v. City of Eugene, 736 F.3d at 1254. 31 Hagen v. City of Eugene, 736 F.3d at 1255. 32 Hagen v. City of Eugene, 736 F.3d at 1257. 33 Hagen v. City of Eugene, 736 F.3d at 1259. 34 Hagen v. City of Eugene, 736 F.3d at 1258-1259.

9 Document #838720 111

employee when he repeatedly complained within the chain of command about work- related safety issues.”35 In Edgerly v. City of Oakland, the plaintiff city administrator (Edgerly) failed to establish she engaged in protected activity for her whistleblower claim. In October 2007, Edgerly gave notice of her planned retirement set for July 31, 2008. The Mayor agreed to this retirement date. However, the mayor placed Edgerly on administrative leave terminated her employment before the planned retirement date. Edgerly brought suit alleging she was wrongfully terminated as a whistleblower because the mayor asked her to violate several provisions of the City's charter, which she refused to do.36 The defendant was a charter city and had established city ordinances under Article XI, section 5, subdivision (a) of the California Constitution.37 The Court of Appeal noted that, as to charter cities, the salaries and wage levels of city employees are municipal affairs. The Court thus determined “the manner in which a charter city enforces its own charter and local rules and ordinances constitutes a municipal affair and cannot be considered a statewide concern.”38 The Court concluded Edgerly's perceived violations of the city's charter, local rules, and ordinances did not fall within the purview of Labor Code section 1102.5, and her whistleblower claim failed as a matter of law.39 HYPOTHETICAL

Police Detective Joe expressed to Assistant Commander Alison his disagreement with the Police Chief’s decision to transfer his partner to a different division. One day later, Joe received a written reprimand for inconsequential matters for which other detectives were not reprimanded. Did Joe engage in protected activity? Answer: No. In Mueller v. County of Los Angeles, the plaintiff firefighter alleged the fire department violated whistleblower protection laws enacted by the county and the State by retaliating against him for voicing his opinion about the transfer of two different fire captains. He further alleged the fire department retaliated against him for filing formal grievances about his treatment at a certain fire station and about several transfers moving him from station to station. The Court found plaintiff’s internal grievances and allegations that the county violated its own policy did not constitute protected activity for purposes of Labor Code section 1102.5. The “activities of the department personnel of which plaintiff complains in his suit do not rise to the level of whistle blower retaliation.

35 Hagen v. City of Eugene, 736 F.3d at 1260. 36 Edgerly v. City of Oakland (2012) 211 Cal.App.4th 1191, 1196. 37 Edgerly v. City of Oakland, 211 Cal.App.at 1204. 38 Edgerly v. City of Oakland, 211 Cal.App.at 1204. 39 Edgerly v. City of Oakland, 211 Cal.App.at 1205.

10 Document #838720 112

Matters such as transferring employees, writing up employees, and counseling employees are personnel matters.”40 HYPOTHETICAL Connie was a deputy city attorney for a charter city. The Mayor asked Connie to advise the City Council that it was not necessary to investigate a harassment claim filed by an administrative assistant against the Mayor. Connie refused. She reminded the Mayor that the City’s anti-harassment policy requires a prompt investigation and appropriate corrective action to be taken. She told the Mayor that she would recommend the retention of an outside investigator to investigate the harassment complaint, pursuant to the City’s anti-harassment policy. On the following day, Connie advised the City Council to retain an independent investigator. The remaining council members agreed and took action. Connie was fired one week later. She then filed a retaliation lawsuit under Labor Code section 1102.5. Did Connie engage in protected activity? Answer: No. Refusing to violate a local rule or ordinance of a charter city does not constitute protected activity under Labor Code section 1102.5.41 HYPOTHETICAL Amy worked as an attorney at a private law firm specializing in construction defects for 10 years. She just began working as a deputy county counsel. She is not familiar with labor or employment laws. She noticed that the county does not pay overtime to deputy sheriffs who work more than 8 hours in a day. Amy believes the county’s practice violates the California Labor Code, thus, she reports her concern about the practice to the Sheriff. Has Amy engaged in protected conduct? Answer: Yes, if Amy can show that she had a reasonable (although incorrect) belief that the county’s practice violated California’s overtime law. Labor Code section 1102.5 protects a public employee who reports his/her suspected violation of law directly to his/her employer.42 HYPOTHETICAL

Police Officer Terrence is required, as part of his duties, to report any dangerous condition he sees on city property. He notes a dangerous condition on incident report forms, about twice a month. He repeatedly

40 Mueller v. County of Los Angeles (2009) 176 Cal.App. 4th 809, 823. 41 Edgerly v. City of Oakland, 211 Cal.App.at 1205. 42 Gardenhire v. Housing Authority (2000) 85 Cal.App.4th 236, 242-243; Mize-Kurzman v. Marin Community College Dist. (2012) 202 Cal.App.4th 832, 866-867.

11 Document #838720 113

reports that the fencing surrounding a construction site is rickety, unsafe, and that nearby residents have complained. Nothing is done even though he submitted 10 incident reports. Terrence thus writes a letter to the mayor and the local newspaper about the dangerous condition.

Has Terrence engaged in protected speech/whistleblower activity?

Answer: Yes, by reporting the dangerous condition to the local newspaper (outside his chain of command).

HYPOTHETICAL Gene is a sworn investigator with the county. He discusses with the director of human resources the county’s practices regarding background investigations. He expresses concern that certain tactics may be unlawful, but he is unsure. Did Gene engage in protected activity? Answer: No, efforts to determine if a practice violates the law is not a protected disclosure under the Labor Code. See Mize-Kurzman v. Marin Community College Dist. where the Court of Appeal stated: “Plaintiff was not disclosing any previously unknown or hidden conduct, practice or policy, but only her view that the known policy was not lawful. That plaintiff views a publicly known policy as unlawful is not a disclosure protected by law.”43 HYPOTHETICAL

Deputy City Attorney Sandra discussed her concerns with Council Members Martha and Jo that they had persuaded the other council members to award a building project to a construction firm partly owned by Martha and Jo as silent partners, but Martha and Jo did not disclose their ownership information to the remaining Council members before the vote. Sandra asked Martha and Jo to come clean, but they refused. Sandra later sent a letter to the entire City Council about her concerns that the building project was awarded to the construction firm, and Martha and Jo failed to disclose their partnership interest, and that the winning firm did not submit proof of insurance or the required licenses. Sandra expressed her concern of favoritism and abuse of authority, and demanded that the contract be rescinded by the City Council. Sandra was terminated from her job one week later for poor performance. She filed a retaliation lawsuit alleging that she was fired for her reporting Martha and Jo’s conflicts of interest and abuse of authority.

43 Mize-Kurzman v. Marin Community College Dist. (2012) 202 Cal.App.4th 832, 866.

12 Document #838720 114

Did Sandra engage in whistleblower activity?

Answer: Yes, her report of abuse was a matter of public concern and protected activity.44

HYPOTHETICAL Deputy county counsel Yvonne discusses with her co-workers that her boss, Senior County Counsel Gina, has been taking bribes. This turns out to be a false rumor. Gina stops talking to Yvonne. Gina instructs another employee to begin recording Yvonne’s arrivals, departures, and break times, and directs other employees not to speak with Yvonne. Was Gina’s conduct “adverse employment action” for purposes of retaliation? Answer: Yes, the constant monitoring, as well as Yvonne’s inability to communicate with co-workers, would likely be found to impair her job performance and affect her prospects for advancement or promotion.

V. ATTORNEY-CLIENT PRIVILEGE ISSUES WHEN IN-HOUSE COUNSEL SUES FOR WHISTLEBLOWER RETALIATION.

Both government and private lawyers are bound by the ethical standards contained in the Rules of Professional Conduct of the State Bar of California. Rule 3- 600, Organization as Client, provides: (A) In representing an organization, a member shall conform his or her representation to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement. When a local entity is the client of an attorney, the local governing body is the holder of the attorney-client privilege.45 Thus, if a city council is the governing body for a city, the city council (not just one member) holds the attorney-client privilege. Attorney-client privilege issues arise when the plaintiff in a whistleblower lawsuit is counsel for a public entity.46 For example, the plaintiff attorney may want to disclose attorney-privileged information in prosecuting his/her retaliation lawsuit against the

44 Dahlia v. Rodriguez (9th Cir. 2013) 735 F.3d 1060, 1067-1068 (reporting police abuse is a matter of public concern). 45 Roberts v. City of Palmdale (1993) 5 Cal.4th 363, 373. 46 Evid. Code, §§ 950 et. seq.

13 Document #838720 115

agency employer. There is scant authority on this issue. The cases indicate that a retaliation lawsuit will not be barred where it is based in whole or in part on attorney- client privileged information. Instead, the courts will use procedures available to protect privileged information while allowing the retaliation action to proceed.

In General Dynamics Corp. v. Superior Court (Rose), the California Supreme Court stated that “trial courts can and should apply an array of ad hoc measures from their equitable arsenal designed to permit the attorney's plaintiff to attempt to make the necessary proof while protecting from disclosure client confidences subject to the privilege. The use of sealing and protective orders, limited admissibility of evidence, orders restricting the use of testimony in successive proceedings, and, where appropriate, in camera proceedings, are but some of a number of measures that might usefully be explored”].)47

In Van Asdale v. Int'l Game Tech., the Ninth Circuit Court of Appeals considered whether former in-house attorneys were barred from bringing a retaliation claim under a federal whistleblower statute (Sarbanes-Oxley Act) by virtue of the Illinois Bar rules of professional conduct. The Court ruled that the possibility that the attorneys’ retaliatory discharge claim against their former employer would implicate communications subject to attorney-client privilege did not compel dismissal of the claim.48 The Court found it was not clear to what extent the retaliation suit actually required disclosure of confidential privileged information, and there was no reason why the district court could not limit testimony regarding confidential information. The Court ruled the appropriate remedy would be for the district court to use the many “equitable measures at its disposal” to minimize the possibility of harmful disclosures, not to dismiss the suit altogether.49

In Cordero-Sacks v. Housing Authority of City of Los Angeles, a former in-house counsel brought action against city housing authority for whistleblower retaliation, common law wrongful discharge in violation of public policy, and retaliatory termination in violation of the California False Claims Act (FCA). The Court found the former in- house counsel’s investigation of the director of the housing authority's technical services department, based on suspicion the director was awarding contracts to unqualified corporations he secretly set up with family members, was “in furtherance of a false claims action,” and supported the FCA claim. The Court of Appeal found that the trial court had properly resorted to the procedures employed that protected the housing authority's privileged information, i.e., granting the housing authority’s motion in limine and sustaining its objections to the introduction of attorney-client privileged information

47 General Dynamics Corp. v. Superior Court (1994) 7 Cal.4th 1164, 1191. 48 Van Asdale v. Int'l Game Tech. (9th Cir. 2009) 577 F.3d 989, 995-996. 49 Van Asdale v. Int'l Game Tech., 577 F.3d at 996.

14 Document #838720 116

—was sufficient to ensure the jury decided the case based on nonconfidential information.50 “We see no reason to create a special offer of proof procedure only in retaliatory discharge cases that might involve attorney-client confidential information.”51

Another unique issue is whether a city attorney may disclose confidential communications exchanged in closed session with the city council in prosecuting his/her retaliation lawsuit against the city. The case, Roberts v. City of Palmdale, provides guidance that an agency, as the holder of the attorney-client privilege, may properly object to the disclosure of privileged communications. The agency should object and concurrently seek judicial protections, e.g., file a motion in limine to preclude disclosure of confidential information.

In Roberts v. City of Palmdale, the California Supreme Court analyzed whether the California Public Records Act (“CPRA”)52 required disclosure of a city attorney’s confidential written opinion letter to the city council regarding a taxpayer’s appeal on the approval of a parcel map. The city attorney wrote that the council’s approval of the parcel map was subject to legal challenge in several respects, and concluded that unless the council reversed its approval of the parcel map, the council was “a willing party to this flagrant effort to undermine its own laws and will be vulnerable to a court action to overturn its decision.”53

The taxpayer sought disclosure of the written letter and argued that it was not exempt from disclosure under the CPRA (Gov. Code, § 6254 (b))54 because the letter did not relate to pending litigation. Alternatively, the taxpayer argued the attorney’s written letter was not protected from disclosure because the Brown Act55 purportedly abrogated the attorney-client privilege, except for pending litigation in closed sessions by Section 54956.9.56 In making its decision, the Supreme Court noted that the CPRA exempts from disclosure records that are protected by privilege under the Evidence Code.57 It further

50 Cordero-Sacks v. Housing Authority of City of Los Angeles (2011) 200 Cal.App.4th 1267, 1280. 51 Cordero-Sacks v. Housing Authority of City of Los Angeles, 200 Cal.App.4th at 1280. 52 California Public Records Act (“CPRA”; Gov. Code, § 6250 et. seq.) 53 Roberts v. City of Palmdale (1993) 5 Cal.4th 363, 367-368. 54 Government Code section 6254(b) exempts from disclosure “Records pertaining to pending litigation to which the public agency is a party, or to claims made pursuant to Division 3.6 (commencing with Section 810), until the pending litigation or claim has been finally adjudicated or otherwise settled.” 55 Brown Act (Gov. Code, § 54950 et. seq.) 56 Government Code section 54956.9 (a) states: “Nothing in this chapter shall be construed to prevent a legislative body of a local agency, based on advice of its legal counsel, from holding a closed session to confer with, or receive advice from, its legal counsel regarding pending litigation when discussion in open session concerning those matters would prejudice the position of the local agency in the litigation.” 57 Roberts v. City of Palmdale, 5 Cal.4th at 370; Evid. Code, §§ 950 et. seq.; Government Code section 6254, subdivision (k) exempts from disclosure “Records, the disclosure of which is exempted or prohibited pursuant to federal or state law, including, but not limited to, provisions of the Evidence Code relating to privilege.”

15 Document #838720 117

noted that the attorney-client privilege applies to communications in the course of professional employment that are intended to be confidential.58 The Court ruled that the city council, as the local governing body, held the attorney-client privilege with respect to written legal opinions by the city attorney, and may assert the attorney-client privilege under the CPRA without alleging that the writing is relevant to pending litigation under Government Code section 6254,subdivision (b).59 Next, the Supreme Court rejected the alternative argument, which was based on the closed session provision of the Brown Act.60 It noted that, although the broad policy of the Brown Act is to ensure that local governing bodies deliberate in public, the Act itself incorporates the attorney-client privilege as to written materials distributed for discussion at a public meeting.61 Further, courts have interpreted the Brown Act as broadly preserving the attorney-client privilege for local governing bodies, and public entities need confidential legal advice to the same extent as do private clients.62 The Court found Section 54956.9 was intended to apply to collective action of local governing boards, not to the passive receipt by individuals of their mail.63 The Court concluded: A city council needs freedom to confer with its lawyers confidentially in order to obtain adequate advice, just as does a private citizen who seeks legal counsel, even though the scope of confidential meetings is limited by this state's public meeting requirements. (Internal citations.) The public interest is served by the privilege because it permits local government agencies to seek advice that may prevent the agency from becoming embroiled in litigation, and it may permit the agency to avoid unnecessary controversy with various members of the public. The balance between the competing interests in open government and effective administration of justice has been struck for local governing bodies in the Public Records Act and the Brown Act. We see no reason to disturb the equilibrium achieved by that legislation. We conclude that although the Brown Act limits the attorney-client privilege in the context of local governing body meetings, it does not purport to abrogate the privilege as to written legal advice transmitted from counsel to members of the local governing body.64

58 Roberts v. City of Palmdale, 5 Cal.4th at 371. 59 Roberts v. City of Palmdale, 5 Cal.4th at 368. 60 Gov. Code, § 54956.9. 61 Roberts v. City of Palmdale, 5 Cal.4th at 373-374. . 62 Roberts v. City of Palmdale, 5 Cal.4th at 373-374. 63 Roberts v. City of Palmdale, 5 Cal.4th at 376. 64 Roberts v. City of Palmdale, 5 Cal.4th at 381.

16 Document #838720 118

Another nuance is whether the plaintiff in-house attorney may elicit testimony from council members as to confidential communications for purposes of prosecuting his/her retaliation claim. The federal district court’s reasoning in North Pacifica, LLC v. City of Pacifica is instructive.

In North Pacifica, LLC v. City of Pacifica, a developer filed suit against the city claiming that its right to equal protection was violated when the city imposed a condition of approval (Condition 13(b)) on the developer’s proposed project that was more onerous than that imposed on similarly situated projects.65 An issue arose as to the permissible scope of the city council members’ potential testimony. The developer argued that it should be allowed to ask the city council members about the decision making process, and the motive and intent of the council members in approving the condition. The city argued that the testimony of the council members was protected by the attorney-client privilege, and was exempt from disclosure under the Brown Act.

Federal law does not recognize a privilege under the Brown Act.66 The District Court discussed Larson v. Harrington67 where the Eastern District Court of California considered whether the attorney-client privilege protected communications made at closed session meetings of the county board of supervisors, during which the board discussed the disciplining of plaintiff as a public employee and received legal advice from legal counsel.

the fact that confidential communications within the privilege may have been made at the board meetings does not cloak the entire proceeding in secrecy. The agendas for the pertinent board meetings ... show that they were closed not to obtain legal advice but to consider disciplining a public employee and those discussions are certainly not within the attorney-client privilege.68

The Court noted there may not be a line between business and legal advice when the communication has multiple functions.69 The Court thus applied the “primary purpose” test to the closed session discussions with legal counsel.

[T]he key question for the instant case is whether any particular communication made during the closed sessions of the City

65 North Pacifica, LLC v. City of Pacifica (N.D. Cal. 2003) 274 F.Supp.2d 1118. 66 North Pacifica LLC v. City of Pacifica, 274 F.Supp.2d at 1126. 67 Larson v. Harrington (E.D.Cal.1998) 11 F.Supp.2d 1198, at 1200-1201. , 68 North Pacifica, 274 F.Supp.2d at 1127 quoting Larson v. Harrington, 11 F.Supp.2d at 1201. 69 North Pacifica LLC v. City of Pacifica, 274 F.Supp.2d at 1127 noting In re Ford Motor Co., 110 F.3d 954, 966 (3d Cir.1997) (concluding that minutes of meeting privileged because, even if ultimate decision reached by committee could be characterized as a business decision, committee “reached that decision only after examining the legal implications of doing so” and decision was “infused with legal concerns”).”

17 Document #838720 119

Council, with legal counsel present, was related primarily to the seeking of legal advice. If so, then that communication is privileged. Cf. Newport, 200 F.R.D. at 634 (discussing packet of information prepared for closed session of county board; stating that “[t]o the extent that the information at issue here is County Counsel's analysis of issues for presentation to the Board at closed session where the Board makes policy and strategy choices on litigation, the information is attorney work-product”). However, if the communication was directed primarily to informing the substantive decision to approve Condition 13(b), then it is not privileged.70

The Court allowed questions into the substantive decision-making of the council members. The Court ruled the City had the burden to show that any disputed information was privileged legal advice such as a litigation strategy decision, however, business advice, e.g., whether to terminate an employee, is not privileged.71

VI. RESPONDING APPROPRIATELY TO WHISTLEBLOWER ACTIVITY

When an agency recognizes that an employee has engaged in protected activity, it should ensure that the employee is not retaliated against because of his/her protected activity. Employers must not take adverse action because of the whistleblower activity.

A. What is an Adverse Action?

An “adverse action” is any act or course of conduct that, on the whole, negatively impacts that employee’s “terms, conditions, or privileges” of employment.72 Adverse actions may include:

- discharge - threatening to discharge - demotion - suspension - written reprimand - failing to promote - elimination of the employee’s position - loss of pay - refusing to follow up on an employee’s complaints - issuing a counseling memorandum - giving a negative performance evaluation

70 North Pacifica LLC v. City of Pacifica, 274 F.Supp.2d at 1128. 71 North Pacifica LLC v. City of Pacifica, 274 F.Supp.2d at 1129. 72 Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1050-1051.

18 Document #838720 120

- changing job duties - paid administrative leave73 In addition, Cal/OSHA prohibits an employer from engaging in “preemptive” retaliation, i.e., firing an employee that the employer fears or anticipates will report safety violations.74

B. Ensure No Retaliatory Intent for the Adverse Action

If the whistleblower employee is subjected to an adverse action, you should anticipate that a retaliation claim will be made. You should promptly investigate and ensure the decision maker had a legitimate, non-retaliatory reason for the action and/or the decision maker had no knowledge of the protected activity. You should also obtain evidence showing that the Agency issues discipline when an employee engages in the same misconduct.

C. Employee Must Prove Legal Causation By Preponderance of the Evidence

Even if an employee engaged in protected activity, and suffered an adverse action, the employee must still prove by direct or circumstantial evidence that the two are connected. The employee must prove, by a “preponderance” of the evidence, that the employer’s reasons are “pretextual.”

The plaintiff’s circumstantial evidence to prove retaliatory intent may include “stray remarks” and the “timing” of events. “Stray remarks” are negative comments made or tolerated by supervisors. “Timing” refers to the inference that the sooner an adverse action occurs after a protected activity the more likely the two are related.

In Clark County School District v. Breeden, the United States Supreme Court held that in order to establish a retaliation claim, the temporal proximity between the protected activity and the adverse action must be “very close.” There is no causal connection where substantial time has elapsed between the protected activity and the alleged adverse employment action.75 See, Hughes v. Derwinsk (7th Cir. 1992) 967 F.2d 1168, 1174-1175 (four month period between engaging in protected activity and alleged adverse employment action insufficient to establish causal connection.); Richmond v. ONEOK, Inc. (10th Cir. 1997) 120 F.3d 205, 209 (three month period between engagement in protected activity and alleged adverse employment action insufficient to establish causal connection).

D. Employer Has High Burden of Proof: Clear and Convincing Evidence

73 Dahlia v. Rodriguez (9th Cir. 2013) 735 F.3d 1060, 1078-1079. 74 Lab. Code, § 6310(b); Lujan v. Minagar (2004) 124 Cal.App.4th 1040, 1046 (“We therefore hold that section 6310 applies to employers who retaliate against employees whom they believe intend to file workplace safety complaints.”). 75 Clark County School District v. Breeden (2001) 532 U.S. 268, 273

19 Document #838720 121

This page left intentionally blank.

122

Land Use and CEQA Litigation Update

Thursday, September 4, 2014 General Session; 1:00 – 2:15 p.m.

Rick W. Jarvis, Jarvis Fay Doporto & Gibson

123 Notes:______

124

Land Use and CEQA Litigation Update

Cases Reported from May through August 7, 2014

Rick W. Jarvis Jarvis, Fay, Doporto & Gibson, LLP 492 Ninth Street, Suite 310 Oakland, California 94607 510-238-1400 www.jarvisfay.com

Thursday, September 4, 2014 General Session; 1:00 pm

League of California Cities Annual Conference September 2014

125 TABLE OF CONTENTS Page

I. INTRODUCTION ...... 1

II. SUMMARY OF PUBLISHED CEQA DECISIONS ...... 1

A. Scope of CEQA ...... 1

Tuolumne Jobs & Small Business Alliance (August 7, 2014) __ Cal.4th __ ...... 1

B. CEQA Exemptions ...... 2

North Coast Rivers Alliance v. Westlands Water District (2014) 227 Cal.App.4th 832 ...... 2

San Francisco Beautiful v. City and County of San Francisco (2014) 226 Cal.App.4th 1012 ...... 3

C. Adequacy of EIRs ...... 5

Sierra Club v. County of Fresno (2014) 226 Cal.App.4th 704 ...... 5

Citizens Opposing a Dangerous Environment v. County of Kern (June 30, 2014) __ Cal.App.4th __ ...... 5

D. Program EIRS, Tiering, etc...... 6

Town of Atherton v. California High-Speed Rail Authority (July 24, 2014) __ Cal.App.4th __ ...... 6

Citizens for a Sustainable Treasure Island v. City and County of San Francisco (2014) 227 Cal.App.4th 1036 ...... 6

E. Supplemental EIRs, Addendas, etc...... 7

Citizens Against Airport Pollution v. City of San Jose (2014) 227 Cal.App.4th 788 ...... 7

F. Project Approval and Findings ...... 8

SPRAWLDEF v. San Francisco Bay Conservation and Development Commission (2014) 226 Cal.App.4th 905 ...... 8

126 G. Legal Challenges – Procedural Defenses (Statute of Limitations, Standing) ...... 9

Citizens for a Green San Mateo v. San Mateo County Community College District (2014) 226 Cal.App.4th 1572 ...... 9

Roberson v. City of Rialto (2014) 226 Cal.App.4th 1499 ...... 10

III. SUMMARY OF CASES PENDING IN THE SUPREME COURT ...... 11

A. Land Use – General Plan Consistency ...... 11

Orange Citizens for Parks and Recreation v. Superior Court Prev. published at 217 Cal.App.4th 1005 ...... 11

B. Land Use – Exactions and Takings ...... 11

California Building Industry Assn. v. City of San Jose Prev. published at 216 Cal.App.4th 1373 ...... 11

Property Reserve v. Superior Court Prev. published at 224 Cal.App.4th 828 ...... 11

C. CEQA – Exemptions ...... 12

Berkeley Hillside Preservation v. City of Berkeley Prev. published at 203 Cal.App.4th 656 ...... 12

D. CEQA – EIR Adequacy ...... 12

California Building Industry Assn. v. Bay Area Air Quality Management Dist. Prev. published at 218 Cal.App.4th 1171 ...... 12

E. CEQA – Mitigation ...... 12

City of San Diego v. Trustees of the California State University Prev. published at 201 Cal.App.4th 1134 ...... 12

Center for Biological Diversity v. Department of Fish & Wildlife Prev. published at 224 Cal.App.4th 1105 ...... 12

F. CEQA – Supplemental Environmental Review ...... 13

Friends of the College of San Mateo Gardens v. San Mateo County Community College Dist. Nonpublished opinion; San Mateo County Superior Court; CIV508656...... 13

127 I. INTRODUCTION

There have been remarkably few “Land Use and CEQA” decisions published since the last update at the May, 2014 City Attorney’s Conference. Indeed, there actually have been NO land use cases of note, and a relatively small number of CEQA decisions. Thus, in addition to summarizing those cases, this paper will also include a summary of land use and CEQA cases currently pending in the California Supreme Court.

II. SUMMARY OF PUBLISHED CEQA DECISIONS

A. Scope of CEQA

Tuolumne Jobs & Small Business Alliance (August 7, 2014) __ Cal.4th __

KEY POINT

• When a city receives an initiative petition signed by at least 15% of its registered voters, its city council may summarily adopt the measure pursuant to Elections Code section 9214 without complying with CEQA.

DISCUSSION

The Supreme Court here unanimously holds that CEQA does not apply to a city council decision to approve an initiative measure based on a voter initiative petition signed by at least 15% of registered voters submitted in compliance with the Elections Code. In other words, it can unilaterally approve the measure without any environmental review, and without the need for actually holding an election.

The facts of the case involve a typically contentious Wal-Mart project for which the city here actually did prepare an EIR, and the project even received a unanimous favorable planning commission recommendation. While the matter was pending city council approval, the project proponents circulated an initiative measure that was ultimately signed by over 20% of the electorate (no doubt to sidestep the inevitable CEQA lawsuit that these projects typically draw when approved on the merits). Upon receipt, the council ultimately approved the project based on the initiative measure rather than submitting it to the voters (and apparently without certifying the EIR that had been prepared). Petitioner sued on various grounds, but the trial court sustained a demurrer to most of the causes of action, including CEQA. The court of appeal issued an appellate writ on the CEQA ground, leading to the Supreme Court’s grant of review and this decision.

When a city council receives such a voter initiative petition, Elections Code section 9214 gives the council one of three options: (1) adopt the initiative without alteration within 10 days; (2) submit it to a special election; or (3) order an abbreviated report on the initiative within 30 days, and then either adopt the initiative (again, within 10 days) or hold a special election. (Elections Code section 9116 places similar requirements on county boards of supervisors.)

128 Prior cases have held that CEQA does not apply to a decision to submit a measure to the voters in an election pursuant to the second option (and this holding has been codified in the CEQA Guidelines at section 15378(b)(3)). The Court here held that requiring CEQA review for measures not submitted to the voters would essentially nullify the other two options provided under section 9214, since lengthy CEQA review could not be completed within its mandatory deadlines. Furthermore, even if CEQA review could be conducted, “cities would be powerless to reject the proposed project or to require alterations in the project that would lessen its environmental impact, no matter what the review showed.” The Court also relied on legislative history demonstrating that the Legislature adopted the third option (allowing preparation of an abbreviated report within 30 days) as a compromise in response to an alternative bill rejected by the Legislature that would have applied CEQA to initiative measures.

(Incidentally, the Court found inapposite its prior holding in Friends of Sierra Madre v. City of Sierra Madre (2001) 25 Cal.4th 165, that CEQA does apply to a city council’s decision to put its own, council- generated measure on the ballot, which are not subject to section 9214.)

The Court rejected public policy arguments that developers could “use the initiative process to evade CEQA review,” reasoning that voter initiatives can also be used to “thwart” development, and concluding that “[t]he possibility that interested parties may attempt to use initiatives to advance their own aims is part of the democratic process.” The Court also noted that the voters could step in and force an election via a referendum petition in response to a city council’s decision to summarily adopt an initiative measure under section 9214.

B. CEQA Exemptions

North Coast Rivers Alliance v. Westlands Water District (2014) 227 Cal.App.4th 832

KEY POINT

• Two-year interim renewal contracts between water districts and U.S. Bureau of Reclamation providing for continued water delivery under existing terms were statutorily exempt from CEQA because they continued an ongoing activity before CEQA was adopted. They were also categorically exempt from CEQA under Class 1 exemption for operation of existing facilities.

DISCUSSION

This case unsurprisingly rejects a challenge to a CEQA exemption for a 2-year interim renewal of an ongoing delivery contract for Central Valley Project water between a water district and the United States Bureau of Reclamation. The district and the Bureau had long been in the process of negotiating a new, long-term (25-year) renewal contract for which the Bureau was in the process of completing more comprehensive environmental documentation. In the meantime, they were agreeing to a series of short two-year renewals. Petitioners included various environmental groups opposed to the on-going diversion of water from the Delta.

The court found that the project qualified for a statutory exemption applicable to projects approved prior to November 23, 1970, holding that the record supported the district’s finding that both the physical water delivery facilities and the actual water usage had started before CEQA was adopted. In

129 addition, the court alternatively found that the project was categorically exempt insofar as it involved the continued operation of existing facilities.

As is typical in such cases, petitioners argued that the categorical exemption should not apply because there was a “reasonable possibility” that the project “will have a significant effect on the environment due to unusual circumstances” (per CEQA Guidelines section 15300.2(c)). In response, the court recognized that there is a conflict in the caselaw as to what standard of review applies to such an “unusual circumstances” challenge, with some courts applying a deferential substantial evidence test and others applying the more exacting “fair argument” standard used to review negative declarations. However, the court found in this case that petitioners would not prevail even under the less deferential standard, reasoning that, because the project contemplated no changes from the “baseline” of existing operations, there could be no resulting new environmental effect.

(Incidentally, the court also recognized that the Supreme Court is expected to resolve the conflict in the caselaw as to what standard of review applies when it decides Berkeley Hillside Preservation v. City of Berkeley, S201116.)

San Francisco Beautiful v. City and County of San Francisco (2014) 226 Cal.App.4th 1012

KEY POINT

• Telecommunication company’s installation of 726 metal utility boxes on city sidewalks throughout San Francisco was exempt from CEQA under Class 3 exemption, as it satisfied the plain language of “installation of small new equipment and facilities in small structures.”

DISCUSSION

This case upholds San Francisco’s determination that the installation of 726 metal utility boxes is exempt from CEQA, based upon an analysis of the plain language of CEQA Guidelines section 15303, which sets forth the exemption for “new construction or conversion of small structures.” The relevant language of that section provides an exemption for “construction and location of limited numbers of new, small facilities or structures” [clause 1] and for “installation of small new equipment and facilities in small structures” [clause 2]. Petitioner argued that the project did not qualify under clause 1, because 726 was not a “limited number,” and that it did not qualify under clause 2 because it involved new construction rather than the mere addition of equipment to previously constructed small structures. However, the court found clause 2 satisfied, rejecting petitioners’ contention that it should be interpreted to only apply to existing structures. The court thus found that it did not need to “consider whether 726 utility cabinets, dispersed throughout the City’s 122 million square feet of sidewalks, qualify as a ‘limited number’ of small structures for purposes of clause 1.”

The court also rejected petitioner’s alternative argument that there was a reasonable probability that the project would have a significant environmental effect due to unusual circumstances, so as to render the categorical exemption inapplicable, given their overall aesthetic consistency with the existing heavily urbanized environment , “which is already replete with facilities mounted on the public rights-of-way.”

130 And this case likewise recognizes the Supreme Court’s pending decision in Berkeley Hillside Preservation v. City of Berkeley, but concludes that, “[w]hatever the outcome of that case, however, we are not persuaded that there is a fair argument of significant impacts here.”

C. Adequacy of EIRs

Sierra Club v. County of Fresno (2014) 226 Cal.App.4th 704

KEY POINTS

• Invalidates EIR for a new 942-acre 2,500 unit master plan community for “active adults” (age 55 and older) on the grounds that it found air quality impacts to be significant and unavoidable without correlating those impacts to a specific analysis of how the project would actually impact human health. • Finds that the EIR improperly concluded that certain mitigation measures would “substantially” reduce air quality impacts without explaining what this meant, where the mitigation measures were vague, unenforceable, and lacked specific enforcement criteria. • Holds that courts should defer to a county’s interpretation of ambiguous provisions of its general plan so long as the interpretation is reasonable.

DISCUSSION

It is common for EIRs to find a project’s cumulative contribution to air quality impacts to be significant and unavoidable, where the project is located in an area with existing air quality problems. In its prior decision in Bakersfield Citizens for Local Control v. City of Bakersfield (2004) 124 Cal.App.4th 1184, the Fifth District surprised CEQA practitioners by identifying what appeared to be a new substantive requirement for EIRs that reach such conclusions. Specifically, it held that, where an EIR finds a project will have such significant and unavoidable air quality impacts, it must then specifically identify and analyze what specific public health impacts will result. The court apparently based this holding on a phrase in CEQA Guidelines section 15126.2, subdivision (a), which states that the EIR’s discussion “should include relevant specifics of the . . . health and safety problems caused by the physical changes” resulting from the project.”

In the present case, the Fifth District further elaborates on this requirement. This case involved a challenge to a county’s approval of a new 942-acre 2,500 unit master plan community for “active adults” aged 55 and older. The EIR found that the project’s cumulative air quality impacts would be significant and unavoidable because it would emit PM10, ROG, and NOx in quantities that exceeded the applicable thresholds of significance. It included some discussion of the adverse health impacts resulting from such pollutants, but did not tie that discussion to the specific emissions of the project. The Fifth District found that, while “the EIR in the present case goes much further than the EIR’s in Bakersfield Citizens,” it still did not contain enough analysis of what health impacts would result from the air quality emissions of the project itself.

131 While the EIR concluded that the project’s impacts could not be fully mitigated, it included a list of mitigation measures that it found would “substantially” reduce the impact, albeit not to a level of insignificance. Even though the EIR did not rely upon the measures to find the impact to be fully mitigated, the court nonetheless found that many of the measures were legally inadequate because they were too vague and unenforceable. And it also faulted the EIR’s conclusion that the measures would “substantially” reduce air quality impacts without explaining what “substantially” meant. The court reasoned that the use of this term “implies that someone has quantified the expected reductions of the tons of emissions . . . and concluded that those expected reductions would be substantial” but found that this “implication is not supported by the discussion in the EIR,” and even suggested that the EIR used the term “inadvertently or as an intentional attempt to mislead the reader.” The court thus directed that, “[o]n remand, if County reasserts its position that the reductions in emissions will be substantial, it should include enough facts and analysis in the EIR to allow a reviewing court to determine whether that finding of fact is supported by substantial evidence.”

While invalidating the EIR, the court did uphold the county’s finding that the project was consistent with its general plan. In so doing, the court, following a long line of cases, applied a very deferential standard of review, and held that it should defer to the county’s interpretation of ambiguous provisions of its general plan so long as that interpretation was reasonable. The case thus reaffirms that courts should not independently interpret general plan provisions as questions of law. However, it should be noted that the Supreme Court may weigh in on the issue of what standard of review applies to a locality’s interpretation of its own general plan in the pending case Orange Citizens for Parks and Recreation v. Superior Court (formerly published at 217 Cal.App.4th 1005).

Citizens Opposing a Dangerous Environment v. County of Kern (June 30, 2014) __ Cal.App.4th __

KEY POINT

• Upholds adequacy and feasibility of mitigation measure for proposed wind farm project which required the applicant to obtain FAA “hazard/no-hazard” determination in order to mitigation aviation-related safety impacts.

DISCUSSION

This case involves a challenge to a county’s approval of a wind farm project near an airport. The county prepared an EIR, which concluded that the project’s wind turbines might pose a significant safety hazard to aircraft. To mitigate this hazard to “less than significant,” the EIR proposed and the County required the applicant to obtain a “Determination of No Hazard to Air Navigation” from the Federal Aviation Administration as a condition of building permit approval for each wind turbine generator.

The court upheld the validity and feasibility of this measure “as a matter of law,” on the theory that “a condition requiring compliance with regulations is a common and reasonable mitigation measure.” While the petitioners argued that the FAA did not have the authority to enforce its own “hazard/no- hazard” determinations, the court found that the county did have the necessary land use authority and had adequately committed itself to implementing and enforcing the mitigation measure.

132 D. Program EIRs, Tiering, etc . . .

Town of Atherton v. California High-Speed Rail Authority (July 24, 2014) __ Cal.App.4th __

KEY POINT

• First-tier program EIR prepared for northern portion of California’s proposed high-speed rail system did not need to analyze site-specific “project level” impacts associated with using elevated tracks for one future segment of the rail line, even though the project-level details in question were known by the time the program EIR was certified.

DISCUSSION

This case rejects a claim that a program EIR prepared for the northern portion of the proposed high speed rail system (the portion linking the Central Valley to the San Francisco Bay Area) needed to analyze the project-level impacts of building an elevated (rather than underground) rail line on a segment of the line to be located on the San Francisco Peninsula (Belmont-San Carlos-Redwood City). This holding involves a straight-forward application of prior caselaw involving tiering and program EIRs, including the oft-cited case of Al Larson Boat Shop, Inc. v. Board of Harbor Commissioners (1993) 18 Cal.App.4th 729.

Perhaps one unique aspect of this case is that, by the time the agency certified the program EIR, it already knew the relevant project-specific details at issue (specifically, it had already determined that undergrounding the Peninsula line was not feasible and thus, in approving the “program,” it was essentially committing to an elevated track). But the court nonetheless upheld the agency’s ability to conduct program level and project-specific level CEQA analyses for the high speed rail at the same time on separate parallel tracks (pun unavoidable).

(Incidentally, the apparent reason for the relatively late timing of the certification of the program EIR was due to a successful CEQA challenge to an earlier certification of the same document, so the agency was re-certifying the program EIR following compliance with a court writ. But, in the meantime, it was proceeding with project-level review of individual components of the program.)

Citizens for a Sustainable Treasure Island v. City and County of San Francisco (2014) 227 Cal.App.4th 1036

KEY POINT

• Upholds EIR prepared for a comprehensive 20-year plan for the redevelopment of the Treasure Island naval station, rejecting legal challenge contending that the EIR should have been labeled as a “program EIR” rather than a “project EIR.”

DISCUSSION

This case involved a challenge to an EIR for a large scale 20-year plan to redevelop the site of the former Treasure Island naval station and the adjacent Yerba Buena Island, with a new “Shining City on the Fill”

133 to ultimately include a new, mixed-use community of up to 8,000 residential units, along with extensive commercial, office, hotel, parks, and a transit hub.

Petitioner primarily challenged the EIR on the grounds that it was labeled a “project specific” rather than a “program” EIR, arguing that the EIR lacked sufficient specificity to constitute a “project EIR” and that this label was an improper attempt to limit future project-specific review of individual development projects. The court rejected this challenge, noting that “courts strive to avoid attaching too much significance to titles in ascertaining whether a legally adequate EIR has been prepared for a particular project” and that “the level of detail in an EIR is driven by the nature of the project, not the label attached.” The court found that no legal authority supported petitioner’s challenge, concluding that petitioner “improperly tries to convert a discretionary decision that should properly be made by the lead agency into a legal issue that should be resolved by the courts.”

In responding to petitioner’s contention that the “project specific” label would improperly circumvent future application of the “fair argument” standard of review for future project approvals, the decision includes a nice summary discussion rejecting petitioner’s “flawed legal premise” and reaffirming that, “[f]or the purposes of the standard of review, the same substantial evidence standard applies to subsequent environmental review for a project reviewed in a program EIR or a project EIR.” It should be noted that the Supreme Court is expected to weigh in on this question in the pending case Friends of the College of San Mateo Gardens v. San Mateo County Community College Dist., S214061.

E. Supplemental EIRs, Addendas, etc . . .

Citizens Against Airport Pollution v. City of San Jose (2014) 227 Cal.App.4th 788

KEY POINTS

• Upholds city’s approval of an addendum to a 1997 EIR and 2003 Supplemental EIR for its approval of amendments to its airport master plan, rejecting petitioner’s contentions that the amendments constituted a new project as a matter of law. • Deferential “substantial evidence test” applies to city’s determination that revisions to a prior EIR were sufficiently minor to warrant adoption of an addendum rather than a subsequent or supplemental EIR. • Recent state law and CEQA Guidelines amendments imposing new requirements for analysis of greenhouse gases are not “new information” triggering the need to supplement an EIR certified before those provisions were adopted.

DISCUSSION

This case involved a challenge to a city’s adoption of amendments to its airport master plan which included changes to the size and location of future air cargo facilities and the modification of two taxiways. In approving these changes, the city adopted an addendum to the EIR it originally certified for the master plan in 1997, and supplemented in 2003. Petitioner’s primary argument was that the changes constituted a “new project” for which the city should have prepared a separate EIR. However, the court found that substantial evidence supported the city’s decision that the amendments would not

134 result in any new significant environmental impacts and thus upheld the city’s determination that it was not a new project requiring a new EIR.

Most of the remainder of the decision involves a routine application of the deferential substantial evidence test to reject petitioner’s various claims. However, it is worth noting that the decision does hold that new standards governing analysis of greenhouse gases did not constitute significant new information triggering the need for supplemental environmental review, reasoning that “information about the potential environmental impact of greenhouse gas emissions was known or could have been known at the time the 1997 EIR and the 2003 SEIR for the Airport Master Plan was certified.” The court thus agreed with the earlier holding on this point in Citizens for Responsible Equitable Environmental Development v. City of San Diego (2011) 196 Cal.App.4th 515.

F. Project Approval and Findings

SPRAWLDEF v. San Francisco Bay Conservation and Development Commission (2014) 226 Cal.App.4th 905

KEY POINT

• Upholds agency finding that a smaller footprint alternative to a proposed landfill project was not feasible for both economic and noneconomic reasons, based upon substantial evidence before the agency that the alternative would result in a 45 percent reduction in revenue, as well as evidence that the reduced project would reduce capacity below that required by state regulations and would shorten the anticipated lifespan of the landfill by a decade.

DISCUSSION

This case actually did not directly address a CEQA challenge, but rather a challenge that a proposed landfill project violated a local ordinance adopted under the Suisun Marsh Preservation Act, which provided that a landfill could not result in the filling, grading, or excavating of watercourses unless no reasonable alternative is available. Applying this ordinance, the trial court had set aside an agency’s approval of a landfill expansion that included the rechanneling of a marsh watercourse, finding that there was no substantial evidence supporting the agency’s rejection of a reduced-size alternative as not economically reasonable.

The court borrowed from CEQA’s definition of “feasible” and CEQA case law concerning economic infeasibility to assess whether the reduced-project alternative was “reasonable” for the purpose of the local ordinance. It then went on to find that there was substantial evidence supporting the agency’s finding that the reduced project alternative was not economically feasible, which evidence included the applicant’s analysis demonstrating that the alternative would result in a 45 percent reduction in revenue, but only a 10 percent reduction in costs (in part because many capital costs would remain largely fixed). The court thus distinguished CEQA cases where alternatives were rejected as economically infeasible without any supporting economic data or analysis. The court further found that there was also additional evidence of non-economic reasons supporting the rejection of the alternative, including that it would reduce the landfill capacity below what state regulations required and would shorten the anticipated lifespan of the landfill by a decade.

135 G. Legal Challenges – Procedural Defenses (Statute of Limitations, Standing)

Citizens for a Green San Mateo v. San Mateo County Community College District (2014) 226 Cal.App.4th 1572

KEY POINTS

• CEQA challenge to agency’s “clear-cutting” of trees found time-barred when brought more than four years after agency originally adopted mitigated negative declaration and notice of determination for a “facilities master plan,” which informed the public that the plan “would result in the removal and pruning of an unknown number of trees.” • Even assuming the prior MND did not adequately notify the public of the clear-cutting, the challenge was nonetheless time-barred because it was filed more than 180 days after a public meeting at which the agency’s board approved the contract for the tree cutting.

DISCUSSION

This case involves a CEQA challenge to a college district’s alleged “clear-cutting” of more than 200 trees on hillsides surrounding a campus. The court found the challenge time-barred for two alternative reasons: (1) it was filed more than 4 years after the district adopted a negative declaration and filed an notice of determination for its “facilities master plan,” which (rather vaguely) stated that the district contemplated removal of “an unknown number of trees”; and (2) it was filed more than 180 days after the district board approved the contract for the actual tree cutting at a public meeting, prior to which the District made available to the public on its website an agenda packet which referenced the tree work, as well as detailed project information including identification of every tree to be removed.

One might debate the correctness of the court’s first holding, insofar as the facilities master plan did not provide any concrete information as to what trees would be removed. The trial court had found that the master plan’s references to tree removal were limited to those actions that were necessary to contemplated building and parking lot improvements, not to other areas of the campus. While the court of appeal found the trial court’s interpretation of the master plan to be too narrow, it does appear that petitioner could have argued that the actual details of the tree removal was “new information” not previously available which could have triggered the need for supplemental environmental review under Public Resources Code section 21166.

However, the court’s second alternative holding provides useful discussion and precedent in favor of the applicability of the default 180-day limitation period for a subsequent project activity where an agency does not file a subsequent notice of determination for that activity. At the time of the district’s approval of the actual contract for the tree cutting work, it had provided to the public full details of the contemplated work. While petitioners tried to argue that the limitations period was nonetheless tolled until they actual discovered the tree removal work, the court emphasized that the relevant inquiry was not when a petitioner was actually aware, but rather when it “knew or reasonably should have known” of the project activities. In this case, petitioners did not even file suit within 180 days of when the tree cutting actually had begun.

136 Roberson v. City of Rialto (2014) 226 Cal.App.4th 1499

KEY POINT

• For purposed of res judicata and collateral estoppel, a city resident opposed to a development project was found to be “in privity” with a separate citizen group who had already unsuccessfully challenged the same project, even though the resident was not a member of the citizen group.

DISCUSSION

This case addresses the question of whether a resident’s CEQA challenge to a development project can be found barred by the doctrine of res judicata, where another citizen group had already unsuccessfully challenged the same project. Petitioner Roberson challenged the same project which was addressed in an earlier decision, Rialto Citizens for Responsible Growth v. City of Rialto (2012) 208 Cal.App.4th 899. For reasons that are not clear, the trial court delayed entry of judgment against Roberson in this case until after the Rialto Citizens case was decided and final. After judgment was finally entered, Roberson then appealed, raising an identical issue that was already decided in Rialto Citizens.

Roberson argued that he was not in privity with the citizen group in Rialto Citizens “because he brought his petition ‘in his own interest’ while Rialto Citizens challenge the project approvals on public interest grounds.” However, the court found this argument belied by allegations Roberson had made in a declaration he had filed in the trial court, in which he stated that the city’s violations of certain notice requirements was “likely to harm the community” and in which he made no mention of any harm he would have suffered to himself. The court thus found that Roberson “had an identity or community of interest with, and adequate representation by” the citizen group.

The court did deny a motion for sanctions against Roberson for filing a frivolous appeal, though it did state that it was a close question.

137 II. SUMMARY OF CASES PENDING IN THE SUPREME COURT

A. Land Use – General Plan Consistency

Orange Citizens for Parks and Recreation v. Superior Court Prev. published at 217 Cal.App.4th 1005

Issue Presented: Is the proposed development project of low density housing at issue in this case consistent with the city’s general plan?

Status: Case fully briefed

Comment: At first blush, it is puzzling why the Supreme Court found that this issue of local general plan consistency merited review. But the real question appears to relate to the extent of the electorate’s referendum power to effectively overturn a city’s approval of a development project. While the voters had successfully set aside a general plan amendment a city had adopted to facilitate a permit for the project, the city concluded that the project was nonetheless consistent with the prior general plan, and the court deferred to the city’s interpretation. This decision will likely address the question of how much deference is owed to a city’s interpretation of its own general plan – the court of appeal was very deferential.

B. Land Use – Exactions and Takings

California Building Industry Assn. v. City of San Jose Prev. published at 216 Cal.App.4th 1373

Issue Presented: What standard of judicial review applies to a facial constitutional challenge to inclusionary housing ordinances that require set asides or in-lieu fees as a condition of approving a development permit? (See San Remo Hotel L.P. v. City & County of San Francisco (2002) 27 Cal.4th 643, 670.)

Status: Case fully briefed; League filed amicus in support of City of San Jose

Property Reserve v. Superior Court Prev. published at 224 Cal.App.4th 828

Issue Presented: (1) Do the geological testing activities proposed by the Department of Water Resources constitute a taking? (2) Do the environmental testing activities set forth in the February 22, 2011, entry order constitute a taking? (3) If so, do the precondemnation entry statutes (Code Civ. Proc., §§ 1245.010- 1245.060) provide a constitutionally valid eminent domain proceeding for the taking?

Status: Briefing pending

138 C. CEQA – Exemptions

Berkeley Hillside Preservation v. City of Berkeley Prev. published at 203 Cal.App.4th 656

Issue Presented: Did the City of Berkeley properly conclude that a proposed project was exempt from the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.) under the categorical exemptions set forth in California Code of Regulations, title 14, sections 15303, subdivision (a), and 15332, and that the “Significant Effects Exception” set forth in section 15300.2, subdivision (c), of the regulations did not operate to remove the project from the scope of those categorical exemptions?

Status: Case fully briefed; argument soon? League filed amicus brief in support of City of Berkeley

D. CEQA – EIR Adequacy

California Building Industry Assn. v. Bay Area Air Quality Management Dist. Prev. published at 218 Cal.App.4th 1171

Issue Presented: Under what circumstances, if any, does the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.) require an analysis of how existing environmental conditions will impact future residents or users (receptors) of a proposed project?

Status: Case fully briefed; League filed neutral amicus brief

E. CEQA – Mitigation

City of San Diego v. Trustees of the California State University Prev. published at 201 Cal.App.4th 1134

Issue Presented: Does a state agency that may have an obligation to make “fair-share” payments for the mitigation of off-site impacts of a proposed project satisfy its duty to mitigate under the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.) by stating that it has sought funding from the Legislature to pay for such mitigation and that, if the requested funds are not appropriated, it may proceed with the project on the ground that mitigation is infeasible?

Status: Case fully briefed; argument soon? League filed amicus brief in support of City of San Diego

Center for Biological Diversity v. Department of Fish & Wildlife Prev. published at 224 Cal.App.4th 1105

Issue Presented: (1) Does the California Endangered Species Act (Fish & Game Code, § 2050 et seq.) supersede other California statutes that prohibit the taking of “fully protected” species, and allow such a taking if it is incidental to a mitigation plan under the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.)? (2) Does the California Environmental Quality Act restrict judicial review to the claims presented to an agency before the close of the public comment period on a draft

139 environmental impact report? (3) May an agency deviate from the Act’s existing conditions baseline and instead determine the significance of a project’s greenhouse gas emissions by reference to a hypothetical higher “business as usual” baseline?

Status: Briefing pending

F. CEQA – Supplemental Environmental Review

Friends of the College of San Mateo Gardens v. San Mateo County Community College Dist. Nonpublished opinion; San Mateo County Superior Court; CIV508656

Issue Presented: When a lead agency performs a subsequent environmental review and prepares a subsequent environmental impact report, a subsequent negative declaration, or an addendum, is the agency’s decision reviewed under a substantial evidence standard of review (Mani Brothers Real Estate Group v. City of Los Angeles (2007) 153 Cal.App.4th 1385), or is the agency’s decision subject to a threshold determination whether the modification of the project constitutes a “new project altogether,” as a matter of law (Save our Neighborhood v. Lishman (2006) 140 Cal.App.4th 1288)?

Status: Case fully briefed; League filed amicus brief in support of District

140

If the employee is able to establish pretext, the burden of proof shifts to the employer who must then present clear and convincing evidence that it would have made the same employment decision for legitimate, independent reasons even if the employee had not engaged protected activity.76 This is a high burden of proof. Accordingly, it is very important for agencies to promptly document their legitimate reasons for employment actions and maintain such documentation.

VII. BOTTOM LINE

A public employee’s complaint to his/her supervisor can constitute protected activity. An employee can even allege that an adverse action occurred because the agency thought employee might blow the whistle.

VIII. TAKE AWAY

Given the potential serious consequences in whistleblower actions, agencies should ensure that their retaliation policies are comprehensive and include complaint procedures. Agencies should regularly provide training to supervisors and managers on how to prevent retaliation, as well as how to recognize and respond appropriately to whistleblower activities. Further, agencies should promptly investigate retaliation complaints, and prepare and maintain documentation.

76 Lab. Code, § 1102.6.

20 Document #838720 141

This page left intentionally blank.

142

EPMC, PEPRA, PERS and PEMHCA – Controlling Employee Pension and Retiree Medical Benefit Costs

Thursday, September 4, 2014 General Session; 2:30 – 3:45 p.m.

Steven M. Berliner, Liebert Cassidy Whitmore

143 Notes:______

144

EPMC, PEPRA, PERS and PEMHCA, LOL OR OMG?

Controlling Employee Pension and Retiree Medical Benefit Costs

By Steven M. Berliner, Partner, Liebert Cassidy Whitmore

OVERVIEW

There are a lot of acronyms to deal with in the law. Public sector retirement law is no

exception. Despite passage of the California Public Employees’ Pension Reform Act

(“PEPRA”) in 2012 (which became effective on January 1, 2013), public sector employers

continue to struggle with the escalating costs of retirement benefits negotiated years (and

sometimes decades) earlier. PEPRA may ultimately prove to be the law that helped limit the

cost of retiree benefits. However, the full effect of PEPRA will be felt many years from now.

Meanwhile, the cost of retirement benefits previously negotiated continues to increase and

mitigate any cost savings that PEPRA produces.

EPMC

EPMC stands for “Employer Paid Member Contributions” and means exactly what it says. It is an employment benefit provided by some employers in which the employer agrees to pay some or all of the statutorily required employee contribution to the CalPERS system. It is an employment benefit as it increases employee take home pay during employment. Also, the level of EPMC provided, if at all, is a matter for negotiation. It can increase up to the maximum (7-

9%, depending upon the applicable benefit formula), or be reduced to zero; and is treated like

any other employment compensation or benefit, such as salary, uniform allowance, vacation or

the like. The mere act of providing EPMC does not make it a retirement benefit, and it is not vested absent unusual language making it vested.

PEPRA did not change any of the rules regarding EPMC for classic members (i.e., generally, retirement system members prior to January 1, 2013, the effective date for PEPRA).

However, new members must pay at least 50% of the actuarially determined normal cost and no

EPMC is allowed. CalPERS determines the normal cost for a particular benefit. CalPERS defines normal cost as “the annual cost of service accrued for the upcoming fiscal year for active employees. The normal cost should be viewed as the long-term contribution rate.”

Some employers chose to not only pay all or part of the employee contribution, but enhance that benefit by reporting the value of the EPMC paid to CalPERS as additional compensation, which increases the base upon which retirement benefits are calculated. While the level of EPMC is not vested, employees whose EPMC is reported as compensation, are hit twice when EPMC is reduced or eliminated. First, their take home pay is reduced during employment as withholding of the statutorily required employee share increases. Second, their retirement benefits may be less than they would have been before the reduction of EPMC

(depending on whether they retire close in time to the reduction, or later). For this second reason, employees often assert that the reduction of EPMC that is reported as compensation impairs a vested right. However, at least one published court decision holds (in a non-CalPERS context) that no impairment occurs when EPMC is reduced. San Diego Police Officers’

Association v. San Diego City Employees’ Retirement System, 568 F.3d 725 (9th Cir. 2009). No court has addressed the issue whether an elimination of the reporting of EPMC as compensation, with no reduction of the amount of EPMC paid, impairs a vested right. As will be shown below

in the discussion of retiree medical benefits, there is a trend in the case law right now making it more difficult to prove a retirement benefit is vested and immune from impairment by the employer. It is not clear how far that line of cases will go in dealing with retiree benefits outside of retiree medical.

COST-SHARING

The opposite of EPMC is cost sharing. This is where the employer and employees agree that the employees will pay part of the employer’s fluctuating employer rate to the retirement system. This may occur in conjunction with a reduction of EPMC to zero or with no reduction at all. Many times, cost sharing is agreeable to employees in lieu of a reduction in EPMC, especially where the EPMC is reported as compensation. Cost sharing allows the employer to achieve cost savings approximately the same as an equivalent reduction of reportable EPMC (but usually less than a commensurate reduction of EPMC). However, where cost sharing is begun when there is no reduction in EPMC, the employees continue to receive EPMC, and where it is reportable as compensation, they preserve their retirement base and their future retirement benefit levels. The employer receives cost savings in exchange.

Cost sharing became easier after PEPRA. The employer and employees are no longer limited in the amount of the employer contribution that employees can agree to pay. As was true pre-PEPRA, cost sharing may not be imposed. Also, there are at least two ways to structure a cost sharing arrangement for CalPERS agencies. First, the agency’s CalPERS contract can be amended. This requires cost sharing to apply to all employees in a membership (e.g., all miscellaneous) class. Because a membership class may include more than one bargaining unit, negotiations are more complicated. However, this method has some advantages to employees

(e.g., all extra employee contributions are considered member contributions and are included in

the member’s CalPERS account; and possible tax advantages such as the pre-income tax

treatment). Second, an employer and an individual bargaining unit can agree to cost sharing in a

collective bargaining agreement. This cost sharing does not involve a CalPERS contract

amendment; nor does it need to involve other bargaining units or unrepresented employees. The advantages to the employees obtained by the CalPERS contract method are lost (although the tax

issues are likely still a gray area.)

After PEPRA, employers and employees can agree that new members pay more than the

50% of normal cost employee contribution mandated by PEPRA. If there is such an agreement,

however, the higher contribution rate must also be applied to unrepresented and management

level new members. At this point, there is neither administrative guidance nor court decisions

that would indicate what advantages, if any, this method of increasing employee costs has over

the more traditional cost sharing methods described above.

PART-TIME EMPLOYMENT

With the coming penalties for employers subject to, but not in compliance with, the

Affordable Care Act, employers have been increasingly looking to limit employees’ hours.

However, even if an employer can structure work schedules to avoid ACA liability, that does not

translate to a savings in retirement costs. While the main weekly threshold for ACA liability is

30 hours, an employee can qualify for CalPERS membership with as little as 20 hours averaged

per week. Also, there is a rule that once an employee is a CalPERS member, the employee

remains a CalPERS member. Therefore, reducing an employee’s hours to avoid ACA liability

will not change the existing employees’ CalPERS membership status. Moreover, when

recruiting for part-time positions, which the employer has budgeted to be non-CalPERS positions, employers must ensure that the person they hire is not a CalPERS member. A person who is a CalPERS member brings that status to the new part-time position. At this point in time, there is no prohibition against inquiring as to the CalPERS status in the hiring process.

RETIREE MEDICAL AND VESTED BENEFITS

When the California Supreme Court held, in the Retired Employees Association of

Orange County, Inc. (“REAOC”) case 1 that it was possible for vested rights to be implied (as

opposed to expressly written into a contract) many employers were concerned that this would

open up a Pandora’s Box of potential new, enforceable claims for unwritten vested retirement

benefits. While REAOC may have prompted additional litigation in this area, the trend of the

cases is decidedly employer friendly, setting a very high threshold for employees to successfully

assert vested rights to retiree medical benefits. It is not clear yet whether the same analysis

utilized by the courts in retiree medical cases will also be used in cases involving retiree benefits

unrelated to medical. However, there does not appear to be a very strong case for limiting these

theories to retiree medical only.

For agencies that participate in the medical programs offered by CalPERS, which are subject to the Public Employees’ Medical and Hospital Care Act (“PEMHCA”), restructuring employee and retiree medical benefits is more difficult than for non-PEMHCA agencies. There are several reasons for this. First, PEMHCA agencies are subject to the PEMHCA minimum and equal contribution rules. All eligible employees and annuitants (retirees who meet specific statutory requirements) must receive a contribution toward insurance from the employer of at least $119 per month in 2014. That amount increases each year and is published by CalPERS.

The equal contribution rule prohibits the employer from making different contributions to

employers and annuitants within the same “group or class.” Group or class is defined in

Government Code section 20636(e)(4), but generally applies to a bargaining unit or other logical

1 Retired Employees Association of Orange County, Inc. v. Orange County (2011) 52 Cal.4th 1171.

work related grouping. Therefore, it is possible to comply with PEMHCA’s requirements by

providing a contribution that is equal (and at or above the minimum) between employees and

annuitants in one bargaining unit, but a different contribution than that provided to the employees and annuitants of a different bargaining unit. Second, PEMHCA prohibits an employer from offering a non-PEMHCA plan except for limited exceptions. Third, PEMHCA discourages employers from opting in and out of CalPERS’ medical program. The window of opportunity to opt out is small. An employer resolution to opt out for the following calendar

year must be filed with CalPERS within 60 days of CalPERS’ announcement of the rates for the

next calendar year. Given that health insurance is a negotiable subject, and that factfinding may

extend the negotiations process, employers need to begin negotiating this subject well before the

next year rates are even known (usually in the late spring). Also, for those agencies that do meet

the timelines for opting out, the decision is irreversable for 5 years.

For those agencies that do not want to opt out of CalPERS medical or want to but cannot

at least for the next calendar year due to the strict timelines, there are some strategies for

controlling employee and retiree medical costs. An employer should strive to state the amount

that it will contribute as a fixed dollar amount rather than as a percentage of the full premium.

This will eliminate an automatic escalator of the employer’s costs in the likely event that

premiums rise. Instead, future increases can be negotiated. Employers should also state the amount of its PEMHCA contribution at an amount at or above the minimum for that year, and equal between employees and annuitants within a group/class. After doing so, additional

contributions for employees can be put into a cafeteria plan. Retirees should not be able to assert that those cafeteria plan contributions must also be made for them under the equal contribution

rules. Moreover, contributions in excess of the PEMHCA minimum can be made among groups of retirees to a Health Reimbursement Account. Employees and other retirees should not be able to use the equal contribution rule as the basis for claiming entitlement to those additional contributions.

CONCLUSION

If you are not already familiar with the acronyms in the title of this paper, you probably will be eventually. PEPRA did not eliminate the need for continued diligence in controlling retirement costs. These issues will likely require additional litigation to address ambiguities in the law.

City Attorney Retirement/PERS Annuitant Issues/ Revolving Door Statutes

Thursday, September 4, 2014 General Session; 2:30 – 3:45 p.m.

Michael H. Roush, Interim Assistant City Attorney, Stockton

153 Notes:______

154

League of California Cities City Attorneys Department League of California Cities Annual Conference Los Angeles, California September 4, 2014

BABY BOOMERS’ POST RETIREMENT CONUNDRUM:

PROVIDING LEGAL SERVICES TO CALPERS AGENCIES WITHOUT RUNNING AFOUL OF CALPERS RULES

John M. Luebberke, City Attorney Michael H. Roush, Assistant City Attorney (Temporary) City of Stockton 425 N. El Dorado Street Stockton, CA 95202 209-937-8333

Presented by:

Michael H. Roush [email protected]

155

BABY BOOMERS’ POST RETIREMENT CONUNDRUM: PROVIDING LEGAL SERVICES TO CALPERS AGENCIES WITHOUT RUNNING AFOUL OF CALPERS RULES

Let’s say that you have been employed by a public agency that contracts with the California Public Employees Retirement System (“CalPERS”) to provide retirement benefits to its retirees. Let’s also say that you are an “annuitant”, i.e., a person who has retired from a CalPERS agency and who is receiving a retirement allowance from CalPERS, or that you are contemplating soon becoming an annuitant. Let’s further say that you enjoy municipal law work, would like to continue such practice and that there are some opportunities for you to do so, either for another CalPERS agency or for the agency that employed you prior to retirement. And, because there is likely to be a financial upside of your having a contractual relationship with a public agency rather than being in an employer-employee relationship, what options are open to you, keeping in mind that the financial consequences to you (loss and repayment of retirement benefits) and to the agency (payment of retirement contributions on your behalf) could be significant if what you believe is a viable option turns out not to be the case.

This paper describes CalPERS views of these matters, sets forth the relevant elements that determine whether a person is an independent contractor or an employee, suggests ways that an annuitant might structure his or her working relationship with a public agency to strengthen the independent contractor relationship and explains other options, as well as those limitations, to continue working for a CalPERS agency following retirement. Although this paper focuses on retired attorneys, many of the principles discussed are applicable to non-attorney annuitants who provide professional services to CalPERS agencies.

The Public Employees Retirement Law will be referred to as the PERL, the Public Employees’ Pension Reform Act of 2013 will be referred to as the PEPRA, and section references are to the Government Code unless otherwise indicated.

THE ANNUITANT AS AN INDEPENDENT CONTRACTOR WITH A CALPERS AGENCY

The View from CalPERS

It is not only fair but probably an understatement to observe that CalPERS has a narrow view when it comes to whether an annuitant may properly be characterized as an independent contractor if the annuitant intends to provide city attorney-type legal services to a CalPERS agency.

CalPERS publishes a guide entitled “Employment After Retirement.” It provides an annuitant may be hired as an “independent contractor” to or a “consultant” for a CalPERS agency but if, under common law principles, the annuitant is an “employee”, restrictions apply. The guide continues that CalPERS’ experience is that many such contracts turn out on review to be employer-employee relationships and therefore CalPERS strongly advises an annuitant to have CalPERS review proposed contracts before the annuitant enters into the contract with the CalPERS agency. What the guide does not say--but what the law (section 20125) says-- is that CalPERS makes membership determinations (subject, of course, to an

156 Page 2

administrative process and judicial review) but the burden to overturn a CalPERS’ determination will be on the annuitant.

In addition, following amendments to the PERL and the enactment of the PEPRA (both discussed in greater detail further in the paper), CalPERS published Frequently Asked Questions: Pension Reform Act of 2013/Working After Retirement (available on the CalPERS website). In relevant part, one question asks whether the PEPRA requirements for working after retirement apply to independent contractors. The answer is yes—no surprise there—but the tone of the response suggests CalPERS will be very skeptical of an independent contractor relationship where the annuitant is performing the same or similar duties as when the annuitant was an active employee: If the terms of employment constitute a common law employer/employee relationship, then the annuitant, from CalPERS perspective, is an employee, not an independent contractor or consultant.

Common Law Employment Principles

Originally, the concept of common law employment principles fixed the boundaries of vicarious liability in tort actions. Villanazul v. City of Los Angeles (1951) 37 Cal. 2d 718. Later the concept was applied in determining an employee’s responsibility under anti-kickback statutes. People v. Palma (1995) 40 Cal. App. 4th 1559.

In Metropolitan Water District of Southern California v. Superior Court (Cargill) (2004) 32 Cal. 4th 491, the California Supreme Court extended the concept to public employment law when the relevant statutory scheme does not provide a definition of employee.

In that case, the Water District, in addition to hiring its own employees and enrolling them in CalPERS, had contracted with several private labor suppliers to provide the District with workers. The District characterized those workers as consultants or temp agency employees and did not enroll them in CalPERS. Those workers filed a class action suit alleging they had been misclassified and therefore improperly denied enrollment in CalPERS. Their complaint alleged they had worked at the District for indefinite periods (including some workers who had worked there for years), that District managers interviewed them and selected them for employment, they worked with the District’s regular employees at the District’s work site, supervisors at the District directly oversaw their work, approved their time cards, determined their rate of pay and work schedules and had the power to discharge them. Plaintiffs also claimed the labor suppliers simply provided payroll services, i.e., issued payroll checks to them.

CalPERS (as the real party in interest) argued it had long used common law principles of employment to determine whether a worker is an employee or an independent contractor and urged the Court to do the same.

The Court held where a statute, such as the PERL, refers to employees without defining the term, courts will apply the common law test to determine whether the person is an employee. The Court concluded the PERL incorporates common law principles into its definition of a contracting agency employee and, therefore, by reason of the Water District’s contract with CalPERS, the Water District was required to enroll in CalPERS all workers who would be considered the District’s employees under California common law, except those who are excluded under a specific statutory or contractual provision.

157

Page 3

Case law has established the criteria that a court will consider to determine if the person satisfies the common law definition of employee. See S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal. 3d 341 [workers compensation]; Tieberg v. Unemployment Ins. Bd. (1970) 2 Cal. 3d 943 [unemployment benefits].

The principal test to determine the employment relationship is whether the person (or entity) to whom services are rendered has the right to control and direct the manner and means of accomplishing the results desired. Put another way, a person is an independent contractor where the person follows the employer’s desire only as to the result of the work but not the means by which it is achieved. Moreover, the right to exercise complete control must be affirmatively shown, rather than the mere suggestion as to detail.

Although the right to control work remains paramount in the equation, there are additional factors to consider including (1) is the person engaged in a distinct occupation or business, (2) is the work usually done under the employer’s direction or is the work usually done by a specialist without supervision, (3) the level of skill required, meaning the higher the level of skill, the less likely the person is an employee, (4) who supplies the instrumentalities of the work and where does the work take place, (5) the length of time for which the services are to be performed, (6) the method of payment, i.e., by the job or by the hour, (7) whether the work is part of the employer’s regular business and (8) whether the parties believe they have created a contractual or an employer/employee relationship. Borello, supra., 48 Cal. 3d at 350-351.

These factors are not to be applied mechanically or separately. Rather they are intertwined and the weight that should be applied to any of them in making the determination will often depend on the particular combination of relevant factors.

Applying the factors in context of providing city attorney related services to a CalPERS agency.

So, in context of an annuitant’s providing city attorney related services to a CalPERS agency, how might those factors be applied?

Right to Control

The right to control factor consists of many elements and bleeds into the other enumerated factors. For example, public agency employees generally are subject to the agency’s instructions as to when, where and how to work, and whether those instructions are daily or ongoing. Also indicative of an employer- employee relationship is whether the person has received training whereby the employer wants services to be performed in a particular way. Moreover, if a person identifies him/herself as a governmental worker, such as by wearing a uniform or displaying governmental identification, it strongly suggests an employer-employee relationship.

Although the public agency (as the client) most often hires the attorney annuitant to provide a range of municipal law related services, the public agency generally is not directing the attorney concerning the means and manner about which the legal services are provided. Moreover, although the attorney has

158 Page 4

received (and continues to receive) training in order to provide competent legal advice, that training is usually not about methods or procedures that the public agency wants the attorney to follow.

On the other hand, although the annuitant may not wear a uniform, the annuitant may identify him/herself in written correspondence or in court as “the city attorney”. In addition, the agency establishes the agency’s priorities, including providing direction as to what work the attorney is to perform for the agency, and reasonably expects the attorney to follow that direction. Generally, the attorney’s work product is an integral part of the public agency’s day to day business and significantly furthers the efforts of the public agency to carry out its mission.

Practice Pointer

Because this factor may pose a close call in CalPERS’ analyzing whether the relationship is contractual or one of an employer-employee, there are some things an annuitant can do to bolster the contention that the relationship is contractual. One would be to have the contract be with a law firm by whom the annuitant is employed or with whom the annuitant is of counsel. Ideally, the contract would not expressly name the annuitant as the city attorney as CalPERS appears to take the position that a “city attorney” must be an employee. Presumably, CalPERS takes that position based on its reading of section 20300 subd. (h) that excludes from CalPERS membership “persons rendering professional legal services to a city, other than the person holding the office of city attorney, the office of assistant city attorney, or an established position of deputy city attorney.”

That reading seems questionable for at least two reasons. First, many if not most contracts between public agencies and private law firms name a non-annuitant individual as “city attorney” or as “assistant/deputy city attorney”. Typically, however, these individuals have not been treated as employees of the agency for CalPERS purposes. Second, CalPERS position reads out of section 20300 subd. (h) the introductory phrase that says, “Except as otherwise provided in this part” (meaning Part 3 [Public Employees Retirement System] of Division 5 of Title 2 of the Government Code). One of the express exceptions is section 20300 subd (b) that excludes from CalPERS membership “independent contractors”.

If being employed by, or being of counsel to, a law firm is not an option the annuitant wishes to pursue, an alternative would be to have the public agency contract with a fictional business entity such as Mary Smith & Associates, even if Ms. Smith (the annuitant) might not have any associates. If that alternative were pursued, I suggest you consider employing the various practice pointers described below.

In light of the above, there is a point of view that notwithstanding CalPERS’ request in its “Guide to Retirement” that annuitants submit their contracts to it before execution, there is no statutory requirement to do so and there are significant risks in doing so.

Occupation

The nature of a worker’s occupation often affects the degree of direction and control necessary to determine the worker’s status. Highly trained professionals generally require very little direction or instruction as to how to perform their services. An attorney is a person engaged in a distinct occupation or business. An attorney must be licensed by the State Bar of California and, in order to be considered

159 Page 5

to serve as city attorney, is likely to have a certain number of years in the practice of not just law, but municipal law. This factor weighs heavily in favor of an independent contractor relationship.

Nevertheless, although an attorney may not be told how to practice law, the public agency may exercise other types of control over the attorney, such as requiring work to be done at the public agency’s office, controlling scheduling and hours of work. As discussed above, the more the public agency exercises such control, the more likely an employer-employee relationship will be found to exist.

Practice Pointer

Annuitants should consider offering legal services to other public agencies, obtaining malpractice insurance, advertising, having a private business mailing address, checking account and business cards, creating a separate email account, website and logo, maintaining a work site separate from the public agency’s work site, and working for more than one public agency, any and all of which would favor an independent contractor relationship with any one public agency.

Specialist

Legal work is done by a licensed attorney, a specialist, without any kind of day to day supervision by the client. Depending on the outcome of the issues discussed under Right to Control and Occupation, this factor, while not determinative, could support a finding of either type of relationship.

Level of Skill

Generally, the higher the level of skill necessary to provide the services, the more likely the person is an independent contractor. Without overstating the case, it is fair to say that most attorneys practicing municipal law have a high level of skill. Thus, this factor would tip the scales towards the annuitant being an independent contractor.

Supplier of Work Instrumentalities/Place of Work

It is unavoidable that at least some of the work that an annuitant/attorney will perform will be at the location of the public agency, whether conducting office hours, attending meetings with staff or attending meetings of the public agency itself. By limiting those hours, however, and providing services at an off site location which, in this age of email and voice mail, is not a difficult task, an annuitant can make a case that a good portion of his/her work is not at the public agency’s “place of business”.

Practice Pointer

To the extent that the public agency provides office space and/or a computer for the attorney at the agency’s site, it will be preferable if the office space and computer are not exclusive as to the annuitant and that others have use of the office space and the computer. (Certainly confidential information whether in written or electronic form must be properly secured.)

160 Page 6

Length of Time

The general rule is that if a contract provides that the work is to be completed by a fixed date, it strongly implies an independent contractor relationship. Often in a contract for legal services concerning city attorney related work there will not be a specific termination date, although the contract will also provide that the contract may be terminated by either party at any time for any reason. Moreover, even in contracts for legal services to a public agency where city attorney related work is not involved, but the relationship is ongoing, there often will not be a termination date.

Practice Pointer

Because independent contractor agreements often have specific termination dates, an annuitant may want to consider including such a provision in the contract, recognizing that may potentially subject a contract to a periodic public vetting or, potentially worse from the annuitant’s point of view, provide opportunities for other individuals or law firms to solicit this work. If that does not work practically or politically, I would suggest the contract be silent as to its term rather than have an “evergreen” provision, i.e., automatically rolling the contract over from year to year.

Method of Payment

Contracts with independent contractors usually provide for payment by the job; persons paid by the hour are more likely to be employees. But attorneys typically bill by the hour, not by the job. Accordingly that an attorney annuitant is paid by the hour should not be fatal to a determination the annuitant is an independent contractor.

Practice Pointer

Avoid being paid bi-weekly or bi-monthly as are employees and vary the number of hours billed each month.

Employer’s Regular Business

The legal services that an annuitant would provide to the public agency are certainly part of the agency’s regular business. This factor weighs in favor of an employer-employee relationship.

Parties’ Belief

Whether the parties believe that they are creating an independent contractor or an employer-employee relationship is determined by examining the parties’ agreement and actions with respect to each other. A written contract that identifies the annuitant as an independent contractor, while not controlling, is evidence of the parties’ intent. The way they represent their relationship to others is also of evidentiary value.

161 Page 7

Practice Pointer

The contract between the annuitant and the public agency should provide expressly that the annuitant is an independent contractor and that no benefits will be provided to the annuitant. Ideally, the contract would also provide that the annuitant will obtain malpractice (and other, as relevant) insurance and indemnify the public agency for the annuitant’s negligence. Moreover, unlike situations where a person who is seeking to have CalPERS (or a court) determine he/she is/was an employee in order to obtain retirement benefits and therefore would be expected to say the relationship was one of an employer-employee, presumably neither the annuitant nor the public agency would have an interest in expressing the view that the annuitant is an employee.

Conclusion

As mentioned above, these individual factors are not applied mechanically or separately. They are interwined and the weight given to any of them depends on the particular facts. But keep in mind CalPERS determines in the first instance who are employees and is the sole judge of the conditions under which persons may continue to receive benefits under the PERL. Section 20125. Should CalPERS determine an annuitant is an employee, thereby triggering the financial disasters in Section 21220 (b) and (c), the burden will be on the annuitant to prove, by a preponderance of evidence, that the determination was incorrect. The annuitant, therefore, wants to avoid that determination in the first instance. By following the practice pointers set forth above, the annuitant will have very strong arguments that he/she is in fact an independent contractor, thereby continuing to receive the retirement benefits that were earned during the time the annuitant was unquestionably an employee.

THE ANNUITANT AS A TEMPORARY OR INTERIM EMPLOYEE

As a person who has worked for a public agency long enough to earn a retirement through CalPERS, you are a logical choice for a CalPERS agency, whether it is the agency for whom you worked previously or a different CalPERS agency, to want to hire you to provide legal services to that agency. But let’s say that you don’t want to run the risk of CalPERS’ scrutinizing your contract with a public agency and second guessing that you are not an independent contractor but an employee, notwithstanding that you will likely be foregoing the higher rate of pay that you would have received as an independent contractor. Or let’s say that you have the opportunity to serve as an interim city attorney while the city recruits for a full time replacement. What restrictions or limitations stand in your way?

The PERL has for some time allowed annuitants to receive a retirement allowance from CalPERS yet be hired by a CalPERS agency so long as the annuitant did not work more than 960 hours in a fiscal year and so long as the rate of pay that the agency paid to the annuitant was within the range of pay that the agency paid regular employees performing comparable work.

In 2011 and 2012, the PERL was amended (and became effective January 1, 2012 and January 1, 2013, respectively). In 2012, the PEPRA was added. [The 2011 amendments were embodied in AB 1028 and the 2012 legislation in AB 340.] These legislative enactments have changed significantly the landscape concerning CalPERS agencies’ hiring annuitants. These changes require CalPERS agencies to be more

162 Page 8

precise in identifying the extra work that necessitates the hiring of annuitants and have created new substantive limitations on hiring annuitants.

Government Code, sections 21224 subd. (a) and 7522.56

Prior to 2012, the PERL at Section 21224 subd. (a) permitted an annuitant to “serve” without being reinstated from retirement or without loss of benefits from CalPERS upon “appointment by the appointing power” of a public agency employer either during an emergency to prevent stoppage of public business or because the annuitant had “skills needed in performing work of limited duration.” Such appointments, however, could not exceed 960 hours for all CalPERS employers in any fiscal year and the rate of pay to the annuitant had to be within the rate of pay for employees performing comparable work.

Section 21224 subd. (a) as amended in 2011 provides an annuitant may serve without loss of benefits as before except that the appointment must be “temporary”. (The 2011 amendments also inserted the word “specialized” before the word “skills” but “specialized” was deleted in the 2012 amendments.)

AB 340 added, among other sections, section 7522.56 and provides that section applies to any person who is receiving a pension benefit from a public retirement system and supersedes any other provision in conflict with that section. Section 7522.56 subd. (c) tracks the language of Section 21224 subd. (a).

“Temporary” is not defined in the PERL but CalPERS in its Circular Letter No. 200-002-14 (attached as Exhibit 1) indicates the word “temporary” in intended to mean temporary “extra help” appointments of a limited duration, such as the elimination of backlog, special projects or work in excess of what permanent employees can do. The Circular Letter warns that annuitants may not be appointed to any type of permanent positions, such as permanent full time or permanent part time positions. The Circular Letter also provides, however, an annuitant may work for more than one fiscal year so long as the work remains “temporary extra work” as set forth above.

Another significant limitation imposed by AB 340 is that an employee who retires from a CalPERS agency must wait 180 days before any CalPERS agency may hire the annuitant. Section 7522.56 subd. (f). There are exceptions to that limitation. One exception is for annuitants who are public safety officers [2 CCR section 579.25 provides the term includes all peace officers as identified in Gov. Code, section 3301] or firefighters who are hired to perform a function regularly performed by a public safety officer or firefighter. Section 7522.56 subd. (f)(4).

Another, more cumbersome and perhaps more difficult politically, exception is if (1) the employer certifies the nature of the employment is necessary to fill a critically needed position in less than 180 days and (2) the appointment is approved by the governing body in a public meeting as a regular, i.e., non-consent, agenda item. Section 7522.56 subd. (f)(1). (This exception appears to apply to appointments made not only by the appointing power but also by the governing body, discussed under section 21221 subd. (h) below.)

Neither exception applies, however, if the annuitant has “accepted a retirement incentive upon a retirement.” Section 7522.56 subd. (g). The term “retirement incentive” is not defined in the statute but is likely focused on early retirement incentives such as “golden handshake” awards.

163

Page 9

The limitation of the total number of hours an annuitant may work for all CalPERS agencies remains the same, 960 hours. Also not changed is that the rate of pay the annuitant receives must be comparable to the pay regular employees performing comparable work receive and the pay cannot include any other compensation or benefit. Section 7522.56 subd (d); Section 21224 subd. (a). For example, if a regular employee’s “rate of pay” without benefits is $30/hour but that employee’s rate of pay with benefits is $40/hour, the annuitant can only be paid at $30/hour. The rate of pay is determined by dividing the monthly pay rate by 173.333. The same figure is derived by dividing the annual salary of the employee by 2080. CalPERS also requires that the pay ranges be posted on the agency’s website.

Practice Pointer

Because the “appointing power” makes these appointments, this section will have more application when the temporary appointment, at least in a city attorney’s office, concerns work that an assistant or deputy city attorney could perform. Where a department head needs extra help of a limited duration, whether due to staff shortages caused by budget cuts or due to the a special project that regular employees cannot accomplish within a reasonable time frame, the agency may hire an annuitant that has the requisite skills to provide that help, the department head should create a paper trail that reflects clearly why the temporary appointment is necessary and what skills the annuitant has to accomplish the work. Exemplars recommending a temporary appointment in a city attorney’s office and in a police department are attached as Exhibits 2 and 3. Moreover, when temporary appointments are to continue to for more than one fiscal year, department heads should articulate in writing the continued need for such appointment so that CalPERS does not view such ongoing temporary appointments as a smoke screen for not filling a permanent position.

Government Code, section 21221 subd. (h).

Separate from the temporary appointments “made by the appointing power” discussed above, section 21221 subd. (h) has also been amended concerning “interim” appointments that a governing body makes during a recruitment for a permanent appointment. Presumably this subdivision is primarily intended to apply to interim appointments of an annuitant during the agency’s recruitment for typical governing body appointments such as city manager or city attorney. Keep in mind, however, that Section 7522.56, and its requirement that the 180 day waiting period be waived, also applies.

As to these interim appointments, again there is a limitation of 960 hours per fiscal year for all CalPERS employers and the compensation must not exceed the maximum published pay schedule for the vacant position. Section 21221 subd. (h), This means that if the city had been paying its city manager $240,000 annually, it may not bring in an annuitant interim city manager at a pay rate of $300,000 annually. If, as is likely because these recruitments tend not to be done quickly, the number of hours the annuitant is expected to work will exceed 960 hours in any fiscal year, the governing body must get approval from CalPERS before the 960 hours are exceeded and only one extension may be granted.

Practice Pointer

Whether the governing body or the appointing authority makes the interim appointment of an annuitant, you will need to remind the appointing power that it must engage in an active recruitment.

164 Page 10

In fact, one agency recently appointed an interim assistant city manager, notified CalPERS of that fact, and was immediately requested to forward a copy of the recruitment materials. Moreover, you should periodically remind whoever is conducting the search for the permanent appointment (often an executive search team) of the need to keep the recruitment wheels moving. Because it is likely the 960 hour limitation will be exceeded before the permanent appointment is made, the agency should be prepared to seek approval for an extension of time well before the 960 hours are expended and explain in detail to CalPERS what efforts have been made to fill the position and why additional time is necessary.

Government Code, section 21221 subd. (g)

Perhaps overlooked is section 21221 subd. (g) that allows, under certain circumstances, for an annuitant to be hired on a temporary basis , i.e., not to exceed 12 months, due to a “leave of absence”, e.g., family leave, and those hours will not be counted towards the annuitant’s 960 hour fiscal year limitation. In order for that subdivision to apply, the governing body must adopt a resolution finding the position is available because of the leave of absence and that the position requires specialized skills that the annuitant possesses. [Note that the word “specialized” remains in this subdivision; it isn’t clear if that was an oversight or purposeful.] Appointments made under that subdivision must be reported to CalPERS along with a copy of the enabling resolution.

Practice Pointer

I have utilized this subdivision on two occasions and received written confirmation from CalPERS that the hours did not count towards the 960 hour limitation. Copies of one of the staff reports, resolution and letter from CalPERS are attached as Exhibits 4, 5 and 6.

The Use of Temporary Agencies

Just a word about annuitants hired through temporary agencies. Public agencies sometimes will contract with temporary agencies to provide assistance. If a person from the temporary agency is an annuitant, it is CalPERS’ position that the limitations described above, including the limit on the number of hours the person can work for the public agency in a fiscal year, as well as the rate of pay, apply. Section 21224 subd. (a).

Practice Pointer

CalPERS also takes the position that persons working for a public agency through a temporary agency must have the public agency track those hours and enroll those persons in CalPERS when the number of hours worked reach 1000 hours in a fiscal year. That may not be in the public agency’s best financial interest. Accordingly, in addition to reminding/informing your HR Departments about the limitations of hiring annuitants through temp agencies, you should also remind/inform them about the 1000 hour limitation for any person hired through a temp agency.

165 Page 11

Summary of Procedures to be Followed.

Given these changes to the PERL and the adoption of the PEPRA for which there have not been any reported appellate decisions, consideration should be given to employing the following procedures for annuitants that are currently employed as well as for new annuitant hires:

1. Put the appointment in writing. 2. Identify the Government Code section on which the appointment is being made, most often either section 21224 subd. (a) or section 21221 subd. (h). 3. Identify the skill set needed or the emergency that exists. 4. Describe the expected duration of the appointment, with the outside date at the end of the fiscal year. If services are needed beyond that time frame, prepare a new appointment memo for the following fiscal year. 5. Describe the hourly compensation to be paid and indicate that it is within the range of publicly available pay schedules for comparable positions. 6. State that no other benefits or compensation will be paid other than the hourly rate of pay. 7. State that the annuitant will work no more than 960 hours in a fiscal year and how that will be monitored. 8. Have the annuitant certify that he/she has not received unemployment benefits in the last 12 months from a CalPERS agency and did not previously receive a retirement incentive. 9. If the appointment is less than 180 days from the date of the annuitant’s retirement and an exception does not apply (e.g., a police officer or firefighter), have the governing body make the necessary findings to waive the 180 day waiting period and ensure the item is NOT on the consent calendar. 10. As to annuitants hired to fill a position due to a leave of absence, ensure the procedural steps, i.e., the governing body adopting an enabling resolution and the City Clerk advising CalPERS in writing of the appointment, along with a copy of the resolution.

Conclusion

Perhaps due to the uncertainty of the outcome to the annuitant if the annuitant chooses to test the waters of being an independent contractor, it appears more and more annuitant attorneys are pursuing the safer and more clear guidelines of being appointed on a temporary or interim basis, notwithstanding that the financial rewards of such appointments are considerably less than the alternative and that the duration of temporary appointments is similarly uncertain. Presumably, with the passage of time, either case law or new legislation will clear up some of this uncertainty. Until then, if the procedures set forth above are rigorously followed, the annuitant, appointed on a temporary or interim basis, will be able to provide valuable legal services to a CalPERS public agency without unreasonable fear of losing hard- earned retirement benefits.

166

General Municipal Litigation Update

Thursday, September 4, 2014 General Session; 4:00 – 5:15 p.m.

Kevin D. Siegel, Burke, Williams & Sorensen

167 Notes:______

168

General Municipal Litigation Update

Cases Reported from April 5, 2014 through August 11, 2014

Kevin D. Siegel Burke, Williams & Sorensen, LLP 1901 Harrison Street, Suite 900 Oakland, California 94612 510.273.8780 [email protected]

September 4, 2014 4:00 p.m.

League of California Cities Annual Conference Fall 2014

169

This page left intentionally blank.

2014 League of California Cities Annual Conference – City Attorneys’ Track Los Angeles Convention Center, Los Angeles

170 I. NATURE OF MUNICIPAL CORPORATIONS ...... 1 Service Employees International Union, Local 1021 v. County of Sonoma (2014) 227 Cal.App.4th 1168 ...... 1 City of Patterson v. Turlock Irrigation District (2014) 227 Cal.App.4th 484 ...... 2 II. OPEN GOVERNMENT AND ETHICS ...... 3 City of Montebello v. Vasquez (2014) 226 Cal.App.4th 1084...... 3 Long Beach Police Officers Association. v. City of Long Beach (Los Angeles Times Communications LLC) (2014) 59 Cal.4th 59 ...... 4 St. Croix v. Superior Court (Grossman) (2014) -- Cal.App.4th --, 2014 WL 3704275 ...... 6 Schwarzburd v. Kensington Police Protection & Community Services District (2014) 225 Cal.App.4th 1345 ...... 7 Town Of Greece, New York v. Galloway (2014) 134 S.Ct. 1811 ...... 9 Rando v. Harris (2014) -- Cal.App.4th --, 2014 WL 3854418 ...... 9 III. ELECTIONS ...... 10 Jauregui v. City of Palmdale (2014) 226 Cal.App.4th 781 ...... 10 Chula Vista Citizens for Jobs and Fair Competition v. Norris (9th Cir. 2014) 755 F.3d 671 ...... 12 IV. PERSONNEL ...... 13 V. FINANCE AND ECONOMIC DEVELOPMENT...... 14 City of San Diego v. Shapiro (2014) -- Cal.App.4th --, 2014 WL 3795956 ...... 14 Sipple v. City of Hayward (2014) 225 Cal.App.4th 349 ...... 16 VI. MUNICIPAL SERVICES AND UTILITIES ...... 17 VII. PUBLIC CONTRACTING ...... 17 VIII. PUBLIC PROPERTY ...... 17 Cohen v. City of Culver City (9th Cir. 2014) 754 F.3d 690 ...... 17 People v. Goldsmith (2014) 59 Cal.4th 258 ...... 18 California Tow Truck Assn. v. CCSF (2014) 225 Cal.App.4th 846 ...... 19 IX. REGULATING BUSINESSES AND PERSONAL CONDUCT ...... 20 218 Properties, LLC v. City of Carson (2014) 226 Cal.App.4th 182 ...... 20

171 Desertrain v. City of Los Angeles (9th Cir. 2014) 754 F.3d 1147 ...... 21 X. LAND USE...... 22 XI. PROTECTING THE ENVIRONMENT ...... 23 XII. CODE ENFORCEMENT ...... 23 XIII. LIABILITY AND LITIGATION ...... 23 Gong v. City of Rosemead (2014) 226 Cal.App.4th 363 ...... 23 Martinez v. County of Ventura (2014) 225 Cal.App.4th 364 ...... 24 Heskel v. City of San Diego (2014) 227 Cal.App.4th 313 ...... 25 Biron v. City of Redding (2014) 225 Cal.App.4th 1264 ...... 26

172 I. NATURE OF MUNICIPAL CORPORATIONS

Statutory Authority to Contract Out for Services

Service Employees International Union, Local 1021 v. County of Sonoma (2014) 227 Cal.App.4th 1168 [see also Personnel Update]

Take-Away: The Health & Safety Code authorizes community development commissions to contract out for housing inspection services.

Facts: The County created the Community Development Commission (Commission) to operate the County's housing authority and redevelopment agency. Health & Saf. Code § 34143(c) authorizes the Commission to "[m]ake and execute contracts and other instruments necessary or convenient to the exercise of its powers.” In 2009, the Commission entered an agreement with a private entity (Sterling) for housing inspection services during periods of high workload (overflow work). In 2012, the Commission decided to contract out non-overflow work and to eliminate three existing staff positions. The County Board of Supervisors authorized the Commission to contract out housing inspection services to Sterling. The Commission sent 90-day layoff notices to three of SEIU's members. SEIU filed suit seeking a writ of mandate and injunctive relief. The Superior Court sustained the Commission's demurrer. The Court of Appeal affirmed.

Holdings & Analysis:

1. Health & Saf. Code §§ 34144 and 34145 authorize the Commission to contract out these services.

a. Section 34145 provides that "the commission may hire, employ or contract for staff, contractors, and consultants …." Section 34144(a) states that the "commission may select, appoint, and employ such permanent and temporary officers, agents, counsel, and employees as it requires …."

b. The plain language is unambiguous and legislative intent is clear. The Commission has "free reign in contracting for the services in question …." Any other reading, e.g., that the Commission may only contract out with other public agencies, would be absurd.

2. Gov. Code § 53060 does not limit the Commission's authority to contract out these services.

a. Section 53060 provides that "[t]he legislative body of any public or municipal corporation or district may contract with and employ any persons for the furnishing of the corporation or district special services and advice in financial, economic, accounting, engineering, legal or administrative matters if such

173 persons are specially trained and experienced and competent to perform the special services required."

b. The specific provisions of the Health & Safety Code control over this general provision of the Government Code. Thus, the Court did not need to determine whether the subject services were special services. (Compare Costa Mesa City Employees' Assn. v. City of Costa Mesa (2012) 209 Cal.App.4th 298, 311 (section 53060 limits city authority to contract out to private entities for special services), which was not discussed in this First District case.)

3. The County did not improperly delegate authority to the Commission. The Legislature authorized the County to enter the subject contract, which the Commission properly did as authorized by the Board of Supervisors.

LAFCO

City of Patterson v. Turlock Irrigation District (2014) 227 Cal.App.4th 484

Take-Away: The LAFCO statutes do not authorize a city to apply to LAFCO to extend special district boundaries for the sole purpose of granting voting rights to consumers who receive extraterritorial service from the district.

Facts: Irrigation District provides extraterritorial retail electrical service, including to City residents. The City submitted an application to Stanislaus LAFCO for extension of the District's boundaries for continued electrical service only (no water service) so that the customers would have voting rights. The District adopted a resolution requesting LAFCO to terminate its proceeding, pursuant to Gov. Code § 56857. The City filed a writ petition challenging the District's resolution. The Superior Court denied relief. The Court of Appeal affirmed.

Holdings & Analysis:

1. The Cortese-Knox-Hertzberg Local Government Reorganization Act was enacted to encourage orderly growth and development. It authorizes an “affected local agency” to apply to LAFCO to change another agency’s organization (e.g., annexation of land in the City’s jurisdiction into a special district). If the agency that is the subject of the application (e.g., the district) opposes the proposal, it may adopt a resolution requesting LAFCO to terminate the proceedings. The resolution must be based on findings supported by substantial evidence of financial or service related concerns.

2. Gov. Code § 56653 provides for the LAFCO applicant to submit a plan for services to be provided to the affected territory. The City's application asserted that a plan for services need not be submitted because the District was already providing retail electrical service and was not being asked to extend any service (e.g., water service). The Court held that the application was defective for absence of a plan for extended services and that the City's writ petition could not provide any meaningful relief.

174 II. OPEN GOVERNMENT AND ETHICS

Conflicts

City of Montebello v. Vasquez (2014) 226 Cal.App.4th 1084, petition for reviewed filed (June 5, 2014)

Take-Away: City Manager’s negotiation of contract and councilmembers’ voting on contract were not protected activity under anti-SLAPP statute, and defendants were thus not shielded from Gov. Code § 1090 suit.

Facts: Refuse hauler (Contractor) has had an exclusive contract to provide residential services since 1962. Defendant Councilmember Urteaga, while running for his seat, suggested to Contractor that it submit a proposal to become the exclusive commercial and industrial waste hauler in the city. Contractor later contributed to Urteaga’s campaign. Defendant City Administrator Torres negotiated with Contractor regarding terms for improved residential services and exclusive commercial and industrial services. Contractor agreed to a $500,000 payment to the City in exchange for exclusivity. Contractor submitted a proposal. The Council approved the contract by a 3-2 vote, with Urteaga and two other Defendant Councilmembers, Vasquez and Salazar, voting in favor. Vasquez signed the contract as the Mayor Pro Tem when the Mayor refused. Contractor contributed to (1) Vasquez’s unsuccessful reelection campaign, (2) the unsuccessful campaign against the Mayor, and (3) the unsuccessful campaign against the recall of Vasquez and Salazar.

The City sued these three Councilmembers as well as the City Administrator (Defendants), alleging they violated Gov. Code § 1090 because they were financially interested in the contract. The City sought to void the contract on the ground that at least one of the Defendants was financially interested and to disgorge to the City any money they received from Contractor. The Defendants filed an anti-SLAPP motion. The Defendants declared they had no financial interest in the contract and that they voted for it because they thought it best for the City. Contractor’s executive vice president declared Contractor made no promise to make any contribution in exchange for a vote. The Superior Court denied the motion. The Court of Appeal affirmed.

Holdings & Analysis:

1. A party may move under CCP § 425.16 for dismissal of “certain unmeritorious claims that are brought to thwart constitutionally protected speech or petitioning activity.” The defendant must make a threshold showing that the action arises from protected activity. If the defendant does, the plaintiff must show a probability of success on the merits. If the action arises from protected activity and lacks minimal merit, it may be stricken.

2. The City asserted that its suit was exempt from the anti-SLAPP motion under section 425.16(d), which provides that the statute “shall not apply to any enforcement action brought in the name of the people of the State of California by the Attorney General, district attorney, or city attorney, acting as public prosecutor” (the “public

175 enforcement exemption). A prior panel of this Second District Court of Appeal ruled that the exemption applied to all civil actions to enforce consumer or public protection. A Fourth District panel disagreed, holding that the exemption only applied to actions brought in the name of the people. This Second District panel agreed with the Fourth District because the text of the statute limits the exception to actions brought “in the name of the people of the State of California,” not to any enforcement action.

3. The anti-SLAPP motion was properly denied because the Defendants did not meet their burden to show the challenged actions arose from protected activity.

a. The Defendant Councilmembers asserted that their votes were protected activity. The Court rejected their arguments. A legislator casts his or her vote as a political representative. He or she has no personal right in the vote. Thus, the votes of Councilmembers Vasquez, Urteaga and Salazar were not protected activity, and they participated in making a city contract in which they had a financial interest.

b. The Defendant City Administrator asserted his negotiations were protected activity. “Nothing about Torres’s acts to negotiate a routine city contract as part of his job as City Administrator implicated his exercise of free speech or right to petition.”

4. Because the Defendants did not meet their burden, the Court “need not reach the second prong of the anti-SLAPP analysis.”

Public Records

Long Beach Police Officers Association. v. City of Long Beach (Los Angeles Times Communications LLC) (2014) 59 Cal.4th 59 [see also Personnel Update]

Take-Away: Names of officers involved in on-duty shootings are generally subject to disclosure under the Public Records Act.

Facts: Two police officers responded to a call about an intoxicated man brandishing a “six- shooter.” The man pointed an object at them. The officers fatally shot him. The object was a garden hose spray nozzle with a pistol grip.

A Los Angeles Times reporter submitted a Public Records Act (PRA) request for the names of the officers as well as the names of other “officers involved in officer-involved shootings” for a six-year period. The Police Officers Association (Union) filed suit to enjoin disclosure, alleging the City stated it would disclose absent judicial intervention. The City supported the Union in the suit. The Los Angeles Times intervened.

The Union’s president, Lt. Steve James, submitted a declaration stating that the release of the names could result in harassment of the officers and their families because harassment has happened in the past and because an anonymous post in the Internet wished an officer’s family would experience Christmas without their father. The City submitted a declaration of Lt. Lloyd Cox who stated that every officer-involved shooting is investigated,

176 and the results of the investigations are treated as confidential personnel records. The Cox declaration also asserted that disclosure could result in harassment.

The lower courts found that the names were not exempt from disclosure and denied a preliminary injunction, without prejudice. The Supreme Court affirmed.

Holdings & Analysis:

1. The PRA, which broadly defines public records, includes multiple exemptions. The public entity claiming an exemption bears the burden to show an exemption applies. The California Constitution, as amended in 2004, directed the courts to narrowly construe exemptions. However, “the constitutional provision excludes from the requirement of narrow construction those statues that protect the privacy interests of peace officers, such as Government Code section 6254(c) [the exemption for personnel and similar files if disclosure would constitute an unwarranted invasion of personal privacy] and the Pitchess statutes,” which are applicable pursuant to Gov. Code § 6254(k).

2. The Pitchess statutes do not exempt the names from disclosure.

a. Evid. Code § 832.7 protects disclosure of a peace officer’s “personnel records.” Section 832.8 defines “personnel records” to include records of employee “appraisal[] or discipline.” The legislative concern “’appears to have been with linking a named officer to the private or sensitive information listed in section 832.8. … It seems unlikely that the Legislature contemplated that the identification of an individual as a peace officer, unconnected to any of the information defined as part of a personnel record, would be rendered confidential be section 832.8.’” [Citing Commission on Peace Officer Standards, italics added by the Court.]

b. The Court rejected the Union and City’s argument that disclosing the names necessarily links the officers to private or sensitive information in their personnel files. The names are just factual information. The Legislature distinguishes between factual information about an incident (which generally must be disclosed) and records generated by an internal investigation into an incident (which generally are confidential). Notably, the Pitchess statutes are silent about whether names of officers involved in shootings are “personnel records.” Further, Pen. Code § 830.10 requires uniformed officers to display their names or identification numbers. While the officers may be investigated, disclosing their names does not imply they are subject to disciplinary action.

3. The Court distinguished Copley Press, Inc. v. Superior Court, in which the records were exempt because they were linked to a confidential disciplinary action.

4. Nor does Gov. Code § 6254(c) preclude disclosure. Merely providing the names would not constitute an unwarranted invasion of privacy in these circumstances. The public has a significant interest in the conduct of peace officers which “diminishes and counterbalances” the officers’ privacy interests. But this would not

177 necessarily be true in every case, e.g., if it were important to keep an officer, such as an undercover officer, anonymous for security reasons.

5. Nor does Gov. Code § 6254(f) preclude disclosure. Records of an administrative or criminal investigation are not at issue.

6. Finally, Gov. Code § 6255(a), the “catchall exemption” that allows an agency to withhold records if it shows “on the facts of the particular case the public interest served by not disclosing the record clearly outweighs the public interest served by disclosure,” does not apply. The vague safety concerns articulated “are insufficient to tip the balance against disclosure ….” But, the Court did “not hold that the names of officers involved in shootings have to be disclosed in every case, regardless of the circumstances.” Rather, the Union and City failed to make a “particularized showing” that the public interest in disclosure is clearly outweighed by the public interest against disclosure. The Union and the City may try to satisfy this standard upon return to the Superior Court.

St. Croix v. Superior Court (Grossman) (2014) -- Cal.App.4th --, 2014 WL 3704275

Take-Away: A city charter that establishes an attorney-client relationship creates an exemption for the disclosure of public records notwithstanding a sunshine ordinance provision that purports to waive exemptions.

Facts: Allen Grossman, a San Francisco resident, submitted, pursuant to the Public Records Act and the City's Sunshine Ordinance, a request for documents pertaining to the development of certain regulations of the San Francisco Ethics Commission. The Commission's Executive Director, St. Croix, produced more than 120 documents but withheld 24 communications between the Commission and the City Attorney's Office. Grossman petitioned for a writ, asserting that the attorney-client privilege did not apply because the Sunshine Ordinance requires disclosure of documents "notwithstanding any exemptions otherwise provided by law." The Superior Court held that the City's Sunshine Ordinance required disclosure. St. Croix and the Commission (collectively, the City) petitioned for a writ in the Court of Appeal. The Court of Appeal granted the City's petition.

Holdings & Analysis:

1. The attorney-client privilege applies to written communications.

a. The attorney-client privilege "'has been a hallmark of Anglo-American jurisprudence for almost 500 years,'" as the California Supreme Court has emphasized. It may result in the suppression of some evidence, "but these concerns are outweighed by the importance of preserving confidentiality in the attorney-client relationship."

b. The scope and availability of the privilege are governed by statute. With respect to the PRA, the statute exempts from disclosure documents covered by privileges set forth in the Evidence Code, which includes attorney-client privilege.

178 c. The Supreme Court has held that even though the Brown Act abrogates the privilege (with some exceptions) in the context of public meetings, it does not abrogate the privilege with respect to documents.

2. The City Charter establishes an attorney-client relationship between the City Attorney's Office and the Commission and its officers.

a. The courts have recognized the importance of retaining confidential communications between an attorney and his or her clients.

b. The attorney-client relationship established by the Charter should not be narrowly construed by the provision of the Constitution that requires narrow construction of statutes that limit the people's rights of access. "The charter necessarily incorporates state law attorney-client privilege as part of that attorney-client relationship," which "conclusion does not result from a broad construction of the charter's provisions … and would not be altered by adopting a narrower construction …."

c. The Charter should not be narrowly construed to avoid a conflict with the Sunshine Ordinance. The rule regarding avoiding conflicts between statutes does not apply here because the Charter controls.

d. The limited, and inapplicable, partial exemption of the Brown Act (re: public meetings) does not support a conclusion that the attorney-client privilege is less important in the public sector. "'Public sector entities need confidential legal advice to the same effect as do private citizens,'" the Supreme Court has written.

3. The Charter supersedes the Sunshine Ordinance.

a. "Because the charter incorporates the attorney-client privilege, an ordinance cannot eliminate that privilege for a class of communications between the city attorney and his or her clients."

b. The voters' adoption of the Sunshine Ordinance did not waive the privilege. Only an amendment to the Charter could.

Council Meeting Conduct

Schwarzburd v. Kensington Police Protection & Community Services District (2014) 225 Cal.App.4th 1345 [see also Personnel Update]

Take-Away: Board members are engaged in protected activity, pursuant to the anti-SLAPP statute, when they participate in a board meeting which a plaintiff alleges could not proceed.

Facts: The Community Services District Board agendized discussion and action on the Police Chief’s compensation package. The Board commenced discussion at 7:45 pm. The Board Policy and Procedures Manual provides that meetings should adjourn at 10:00 pm, and that at 9:45 pm, the Board shall stop the meeting to consider what to discuss in the

179 remaining 15 minutes or whether to extend the meeting. At 9:45 pm, the Board considered whether to extend the meeting, but a motion failed to secure the necessary four-fifths vote. At 10:00 pm, the Board unanimously voted to extend the meeting. Thereafter, the Board approved a compensation package for the Police Chief which included a retention and merit bonus. Plaintiffs filed a writ petition alleging the Board and the Board Members (Defendants) failed to give proper notice of the action taken and violated the Board’s Policies and Procedures Manual. The Board and Board Members filed an anti-SLAPP motion. The trial court denied the motion. The Court of Appeal reversed.

Holdings & Analysis:

1. Anti-SLAPP statute standards.

a. Two-step analysis: Pursuant to CCP § 425.16, the court first determines if the challenged cause of action arises from protected activity (constitutional right of petition or free speech). If the defendant makes this showing, the burden shifts to the plaintiff to establish, with admissible evidence, a reasonable probability of success on the merits.

b. Public Interest Exception: the statute does not apply to an action brought solely in the public interest or on behalf of the general public.

2. Plaintiffs did not show the public interest exception applied. “[T]heir claims do not operate to enforce an important right affecting the public interest.” In addition, they asserted that they were enforcing the Brown Act, but the Brown Act does not apply to the District. Further, enforcing a policy to terminate discussion at a public meeting does not benefit the public.

3. Under the first prong of the analysis, the Board Members established that they were engaged in protected activity. Plaintiffs sued the Board Members “based on how they voted and expressed themselves at the Board meeting.” [Italics in original.] Thus, the trial court erred by denying the anti-SLAPP motion as to the Board Members. However, as to the Board itself, allegations that it violated its policies and procedures do not implicate protected activity.

4. Under the second prong, Plaintiffs cannot establish that their suit has any merit. The Board did not violate its own policies when it voted, at 10:00 pm, to continue the meeting. In addition, the agenda notice properly informed the public that the Board would be considering the Police Chief’s compensation package. Plaintiffs claimed that the bonus was an improper retroactive payment, but “it is clear” that the bonus was actually an incentive to encourage the Chief to extend his tenure. Thus, the trial court erred by denying the anti-SLAPP motion as to the Board.

180 Council Meeting Invocations

Town Of Greece, New York v. Galloway (2014) 134 S.Ct. 1811 [discussed at May 2014 City Attorney's Conference]

Take-Away: Invocations at council meetings are constitutional absent a discriminatory selection policy.

Facts: The Town invited volunteers to open council meetings with prayer. The stated purpose was to put councilmembers in a solemn, deliberative state of mind. The Town, which is predominately Christian, compiled a list from a local directory. All volunteers were Christian from 1999 through 2007. The Town did not review or edit the prayers. Plaintiff was offended when she attended a council meeting. She complained. The Town invited a Jew and a Wiccan priestess to do the invocation. The Second Circuit held the practice was unconstitutional. The Supreme Court reversed.

Holdings & Analysis:

1. In Marsh v. Chambers, the Court upheld invocations before legislative sessions based on history and tradition. This standard—review of invocations based on history and tradition—applies to local agency meetings.

2. There is a long history and tradition of invocations at public meetings. The Town’s history of invocations falls within this tradition. The Town did not police or edit the content, and there was not a pattern of proselytizing or denigrating comments. In addition, the Town did not engage in a discriminatory selection policy. “That nearly all of the congregations in town turned out to be Christian does not reflect an aversion or bias on the part of the town against minority faiths.”

3. In addition, the invocations had a ceremonial, non-coercive purpose, unlike a high school graduation prayer that is conducted before a captive audience. (Lee v. Weisman.)

4. The case is in accord with the recent Ninth Circuit decision in Rubin v Lancaster.

Councilmember Qualifications

Rando v. Harris (2014) -- Cal.App.4th --, 2014 WL 3854418

Take-Away: The Attorney General has considerable discretion to deny quo warranto applications.

Facts: Councilmember Quintero did not run for reelection. Meanwhile, a sitting Councilmember won election as City Treasurer and gave up his seat. The Council appointed Quintero to fill the vacancy and serve the remainder of the term. Petitioners applied to the Attorney General for leave to sue quo warranto, claiming that the appointment violated a City Charter provision. The Attorney General found that the provision was ambiguous, but that the better interpretation was that it prohibited a Councilmember from

181 using his or her influence to gain non-elective City employment and did not impose term- limits for elective office. Petitioners sought unsuccessfully sought writ relief in the trial and appellate courts.

Holdings & Analysis:

1. Quo warranto (“by what authority”), which is codified at CCP § 803, is the exclusive procedure by which one may challenge any person who usurps, intrudes into, or unlawfully holds public office. Only the Attorney General or a person authorized by the Attorney General can bring such an action.

2. The courts will only issue a writ to reverse the Attorney General’s decision on a quo warranto request if it constitutes an abuse of discretion.

3. The Attorney General did not abuse her discretion. It was debatable whether the Charter created term limits for elective office. However, the Attorney General retains discretion not to sue when the issue is debatable.

III. ELECTIONS

Jauregui v. City of Palmdale (2014) 226 Cal.App.4th 781, petition for review filed (July 8, 2014)

Take-Away: If at-large council elections result in minority vote dilution, the courts may issue injunctive relief, even against charter cities.

Facts: The Charter City of Palmdale holds at-large elections for city council. According to the complaint, the City’s population is approximately 55% Latino and 15% African American. In the last ten years, only one Latino has been elected to the city council and no African American has. Plaintiffs alleged the at-large elections have resulted in vote dilution in violation of the California Voting Rights Act. After trial, the Superior Court issued a statement of decision finding vote dilution. The Court issued a preliminary injunction prohibiting the City from certifying the results of the upcoming November 2013 election pending implementation of a final plan to require district elections. The City separately appealed the preliminary injunction and the approval of the final plan. Only the preliminary injunction is now at issue. The Court of Appeal affirmed.

Holdings & Analysis:

1. The City did not challenge the Superior Court’s findings of vote dilution. Instead, the City asserted that its status as a charter city precluded application of the California Voting Rights Act (Act). The Court of Appeal rejected the argument.

a. Elec. Code § 14207 provides that at-large elections “may not be imposed or applied in a manner that impairs the ability of a protected class of candidates of its choice or its ability to influence the outcome of an election.” “’Protected class’ means a class of voters who are members of a race, color or language minority

182 group” per the federal Voting Rights Act. (Elec. Code § 14026(d).) “’Racially polarized voting’ means voting in which there is a difference … in the choice of candidates or other electoral choices” between the voters in the protected class and the rest of the electorate.” (Elec. Code § 14026(e).) There are many methodologies that may be employed to determine whether at-large elections impair a protected class’ voting rights. Proof of intent to discriminate is not a factor.

b. A four-step analysis applies to the question of whether a charter city’s law conflicts with a state statute: (i) whether the local law regulates a “municipal affair;” (ii) whether there is an “actual conflict;” (iii) whether the state law addresses a “statewide concern;” and (iv) whether the state law is “reasonably related … to resolution” of the issue of statewide concern and is “narrowly tailored to avoid unnecessary interference in municipal governance.”

c. Section 14207 (precluding at-large elections that impair a protected class’ rights) applies to charter cities.

i. “[H]ow city council members are elected is the essence of a municipal affair.”

ii. “[I]f there is a dilution of a protected class’s voting rights, then defendant’s at- large electoral system actually conflicts with section 14207.”

iii. “Given the history of our nation and California, there is a convincing basis for the Legislature to act in what otherwise be a local affair.” The purpose of the Act is to protect the integrity of elections and implement the equal protection and voting guarantees of the California Constitution.

iv. The subject provisions of the Act are narrowly tailored and do not unnecessarily interfere with municipal governance. They “apply only if there is dilution of protected classes’ votes.” [Italics in original.]

d. Charter cities do not have plenary authority over their elections.

i. Article XI, section 5, of the California Constitution provides that “’plenary authority is hereby granted, subject only to the provisions of this article’” to city elections as well as to the hiring, firing and conditions of the employment of city personnel. [Italics added by the Court.]

ii. But this provision is not absolute. For example, the Supreme Court has ruled that charter cities do not have absolute control over employment matters; they must comply with the Meyers-Milias-Brown Act. (Seal Beach Police Officers Assn. v. City of Seal Beach.) Thus, charter cities do not have absolute authority regarding their elections.

2. The Superior Court had authority to enjoin certification of the election results.

183 a. The City asserted that CCP § 526(b)(4) and Civ. Code § 3423(d) prohibit the preliminary injunction. These sections state that an injunction cannot prevent the execution of a statute by officers of the law for the public benefit.

b. Elec. Code § 14209 trumps the foregoing statutes. It authorizes a court to “’implement appropriate remedies, including the imposition of district-based elections ….’” [Italics added by the Court.] “What constitutes ‘appropriate remedies’ is ambiguous.” The Court determined that legislative intent was to authorize an injunction of the type at issue in this case. Reasons included that section 14209 is more recent and specific and that the Legislature intended to expand the protections of the federal Voting Rights Act, which act allows for similar injunctive relief. Moreover, remedial legislation should be liberally and broadly construed. Thus, the Superior Court was authorized “to defer certification of the election results while a final plan is promptly prepared” to implement district voting.

Chula Vista Citizens for Jobs and Fair Competition v. Norris (9th Cir. 2014) 755 F.3d 671

Take-Away: Elections Code requirement that initiative proponents disclose their identities to would-be signatories at the time of circulation of an initiative petition violates the First Amendment.

Facts: Unincorporated associations (Associations) sought to place an initiative on the ballot to preclude public works contracts where there was a requirement to use only union employees. Two Association members agreed to serve as proponents of the initiatives (Proponents). The Proponents submitted a notice of intent, which they signed pursuant to the Elections Code. The Proponents circulated the Petition and gathered signatures, but the City Clerk rejected the petition because the Proponents had not signed the circulated sections of the petition. Instead, the circulated sections of the petition identified the Associations' PACs. The Proponents submitted a second notice and petition that complied with the requirements, and the voters approved the initiative.

In the meantime, the Associations and Proponents filed this action to challenge (1) the requirement that initiative proponents be electors (the "elector requirement") and (2) the requirement that the Proponents sign the sections of the petition circulated for signature (the "petition-proponent requirement"). The District Court ruled for the City and the State, which had intervened. The Court of Appeals reversed with respect to the second issue.

Holdings & Analysis:

1. The elector requirement: the Associations claimed that they have First Amendment rights to promote an initiative, e.g., to serve as a proponent, without depending upon their members to act as proxies. The Court disagreed.

a. The initiative power is a legislative power, and only natural persons can legislate. The act of placing an initiative before the voters is a component of this legislative power.

184 b. The restrictions on this legislative activity do not violate the Associations' right to free speech. The legislative power "is not personal to the legislator but belongs to the people." Thus, just as a legislator has no right of free speech allowing him or her to vote despite a conflict of interest, the Associations have no right of free speech to serve as a proponent of an initiative.

c. In addition, while the Associations have the right to engage in expressive activity, that right does not confer a right to share legislative power. Otherwise, individuals would have unfettered rights to engage in free speech activity irrespective of the context (e.g., to participate in debates on the floor of the state legislature).

2. The petition-proponent requirement: the Proponents claimed that the compelled disclosure of their identities at the point of contact with the signatories (i.e., identification on the sections of the petition being circulated) violates their rights to free speech. The Court of Appeals agreed.

a. The parties agreed that the petition-proponent requirement is regulation of political speech. Thus, the Court assumed that the requirement is a "direct regulation of the content of speech subject to First Amendment scrutiny."

b. "Exacting scrutiny" applies to the review of the petition-proponent requirement. This requires more than "the mere assertion of a connection between a vague interest and a disclosure requirement." The requirement does not survive exacting scrutiny.

i. The State does not have a strong interest in informing the electors of the proponent's identity at the signature gathering stage. The signatories can learn the identity of the proponents by inquiring about who signed the notice of intent to circulate. Moreover, preserving the anonymity of the proponents at the time of contact with voters is valuable, as it ensures that the focus is on the content of the speech, not who is speaking. Accordingly, the Supreme Court has invalidated laws that require circulators to wear badges, and this Court similarly concluded that the State does not have a strong interest in compelling disclosure at this point of contact.

ii. The State also asserted an interest in preserving the integrity of the electoral process. But the State could not show that compelled disclosure provided any benefit (e.g., against fraud).

IV. PERSONNEL

[See Personnel Update]

185 V. FINANCE AND ECONOMIC DEVELOPMENT

Taxes and Fees

City of San Diego v. Shapiro (2014) -- Cal.App.4th --, 2014 WL 3795956

Take-Away: A city may not adopt the procedures of the Mello-Roos Act to limit the electorate to specified property owners for a vote on special taxes.

Facts: The City adopted an ordinance (Ordinance) authorizing the City to create a Convention Center Facilities District (CCFD) to help fund expansion of the Convention Center through the imposition of a special tax. The Ordinance provides that the CCFD encompasses the entire City but that only hotels would be taxed, based on room revenues. The Ordinance incorporates and modifies provisions of the Mello-Roos Community Facilities Act of 1982 (Act). The Act provides that, re: special taxes, the legislative body may limit the vote to the landowners subject to the tax (except for apportioned taxes on residential property). (Gov. Code § 53326(c).) The Ordinance incorporates and modifies this provision, providing that the vote shall be by (1) the fee owner of land underlying a hotel or (2) the owner of the hotel if the fee is owned by the government (Landowners).

The City Council adopted resolutions (1) forming the CCFD and a methodology for calculating the tax based upon room revenues, (2) authorizing the issuance of bonds to be repaid by the taxes, and (3) setting a special election for a vote on the special tax by the Landowners. The Landowners approved the tax.

The City filed a validation action regarding the special tax. An individual and San Diegans for Open Government answered the Complaint. After briefing and hearing, the Superior Court ruled for the City. The Court of Appeal reversed.

Holdings & Analysis:

1. The special tax is invalid because it was not approved by two-thirds of the qualified electors, as required by Propositions 13 and 218.

a. Textual Analysis:

i. Proposition 13 and Proposition 218 provide that special taxes must be approved by two-thirds of the qualified voters and two-thirds vote of the electorate, respectively. (Cal. Const., art. XIIIA, § 4, Cal. Const., art. XIIIC, § 2.)

ii. The terms “qualified voters” and “electorate” are effectively synonyms. Reasons include that the Propositions 13 and 218 are related measures designed to achieve similar goals (e.g., to limit taxation authority). Thus, much of the analysis applies equally to each provision.

iii. “Qualified voter” has been described as a natural person who is qualified and registered to vote. (See, e.g., Neilson v. City of California City (nonresident

186 landowner’s challenge to parcel tax failed; the registered voters properly adopted the tax, irrespective of who must pay).) Qualifications for voting are set forth in the Constitution. The City did not cite, and the Court did not find, authority suggesting there could be other qualifications.

iv. With respect to Proposition 218, section 4 of Article XIIID provides for property owners to approve assessments (as opposed to taxes). This shows an intent to distinguish between qualified voters, who can vote on taxes, and property owners, who have the right to vote on assessments. Moreover, subdivision (g) expressly contrasts electors with property owners, explaining that this distinction should be deemed constitutional because the purpose is to allow property owners to vote on property assessments for which their properties receive special benefits.

b. Legislative History: The ballot materials for both propositions discuss approval of taxes by voters. They do not discuss or suggest that local governments could “exclude large numbers of registered voters from voting in a special tax election by limiting who would be deemed ‘qualified electors.’”

c. Voter Intent: The voters who approved Propositions 13 and 218 intended to limit government authority to impose or raise taxes. The Court’s interpretation is consistent with this intent.

d. Policy: The City suggested that the vote was proper because only the Landowners will have to pay the tax. But the voters expected that the general electorate would vote on taxes, irrespective of who paid. Moreover, it is glib to assert that the Landowners are the party who actually bear the burden to pay the taxes.

e. The Legislature’s adoption of a property-owner voting mechanism does not save the City.

i. The subject constitutional language is not ambiguous.

ii. There is no indication that the Legislature considered whether a landowner election would be comply with Proposition 13, which had been adopted four years prior.

iii. In any event, the Act could not trump the Constitution.

2. The special tax violates the City Charter. The City Charter similarly requires taxes to be approved by registered voters.

187 Sipple v. City of Hayward (2014) 225 Cal.App.4th 349, review denied (July 23, 2014) [discussed at May 2014 City Attorney's Conference]

Take-Away: Business has standing to seek refunds of improperly collected taxes on behalf of customers to whom it is obligated to remit refunds by judicially-enforceable settlement agreement.

Facts: New Cingular improperly charged customers local taxes for internet access. New Cingular settled federal court class action, agreeing to seek refunds. New Cingular submitted refund claims and then filed state court lawsuits. The Superior Court sustained Cities' demurrers on the grounds that local ordinances prohibited class claims and require taxpayers to file individual claims. In McWilliams v. City of Long Beach, the Supreme Court held that class claims were permitted by the Government Claims Act. On appeal, Cities now contend that New Cingular cannot proceed because it has not refunded the taxes and that it lacks standing. The Court of Appeal reversed.

Holdings & Analysis:

1. Gov. Code § 910 governs class claims for refunds, and it preempts a local ordinance which seeks to require the service provider to have actually refunded the taxes as a precondition to presenting a claim to the city. New Cingular's claims complied with section 910.

2. New Cingular has standing.

a. A party must be beneficially interested and have a special interest or right at stake.

b. The courts of appeal have issued mixed rulings regarding whether a business that remits taxes to a local agency has standing to seek refunds on behalf of customers. The better reasoned and more recent cases hold that the businesses have standing. The businesses have interests because they are legally responsible for the taxes, had remitted them and could be adversely affected. Moreover, the local agencies should not be unjustly enriched by being permitted to retain illegal local taxes.

c. "Although the issue of standing is a close one, we find that under the unique circumstances presented by this case, New Cingular has a beneficial interest and is a proper plaintiff." New Cingular seeks to recover taxes it actually remitted, and it is obligated to pay its customers the refunds pursuant to the judicially-enforceable settlement agreement. Moreover, Cities should not be unjustly enriched.

3. However, the demurrers to the individual plaintiffs' claims were properly sustained because they had not alleged the particular cities to which they had paid taxes.

188 VI. MUNICIPAL SERVICES AND UTILITIES

[No reported cases]

VII. PUBLIC CONTRACTING

[No reported cases]

VIII. PUBLIC PROPERTY

Streets and Sidewalks: ADA and Curb Ramps

Cohen v. City of Culver City (9th Cir. 2014) 754 F.3d 690

Take-Away: A city may violate the ADA if it allows third parties to obstruct disabled access points (e.g., sidewalk ramps).

Facts: Plaintiff, an elderly man who uses a cane and suffers from dementia, walked through an outdoor car show on City streets. A vendor's display blocked a curb ramp that provided access to the sidewalk. Plaintiff tripped while trying to walk around the display and step up on the sidewalk. He filed an action alleging violations of the federal ADA and seeking damages. The District Court granted the City's motion for summary judgment. The Court of Appeals reversed.

Holdings & Analysis:

1. Title II of the federal ADA requires local government to provide equal access to city programs, e.g., sidewalks, to disabled persons. To prove an ADA violation, the plaintiff must prove he or she is a qualified individual with a disability; he or she was excluded from, or denied access to, an agency program; and the exclusion or denial was by reason of the disability. 28 CFR § 35.150 governs existing facilities, requiring, for example, agencies to implement a plan to install disabled access curb ramps at intersections. 28 CFR § 35.151 requires that facilities public agencies begin to build or alter after January 1992 be readily accessible unless it would be structurally impracticable.

2. The District Court erred by granting summary judgment.

a. The District Court reasoned that Plaintiff could have accessed the sidewalk by a nearby curb ramp and thus was not denied access to the sidewalk. The District Court relied on precedents concerning public agencies' obligations when they modify existing facilities. (28 CFR § 35.150.) However, the cases are inapposite

189 because the City was in compliance with the ADA but allowed elimination of the disabled access it had built.

b. 28 CFR § 35.151 is more applicable than section 35.150 because this matter involves alteration of existing sidewalks. "When the City has already built a direct route that is accessible to disabled persons, it is reasonable to require the City not to force disabled persons to look for and take even a marginally longer route."

c. The City allowed the sidewalks to be used by private vendors but failed to take action to ensure continued ADA compliance (e.g., to prevent blockage or to provide temporary signage directing pedestrians to the nearby ramp). Thus, the jury could conclude that the City violated the ADA, including provisions requiring facilities to be readily accessible and to be kept free of obstructions.

Regulating Activity on Streets and Highways

People v. Goldsmith (2014) 59 Cal.4th 258

Take-Away: Red light camera photographs are presumptively authentic if based on an automated system adopted pursuant to the Vehicle Code.

Facts: Defendant was cited for failing to stop at a red light in the City of Inglewood based on photographs from an automated red light camera. Defendant claimed the photographs lacked foundation and were hearsay. The trial court overruled the objections and found Defendant guilty. The Supreme Court affirmed.

Holdings & Analysis:

1. The Vehicle Code authorizes local governments to install automated traffic enforcement systems (ATES). Section 21455.6 requires the city council or board of supervisors to conduct a public hearing before entering a contract for the installation of an ATES. Section 21455.5 requires notice prior to enforcement at intersections. It also requires the local agency to establish procedures for the operation of an ATES and to maintain ultimate control and supervision of the system.

2. An investigator with the City’s police department testified regarding the operation of the ATES, the City’s contract with a private company to maintain the system, and the photographs at issue which showed the Defendant ran the red light.

3. The testimony laid a sufficient foundation for the ATES-based evidence. The investigator established that the photographs were obtained in the normal course of the City’s operation. Under Evid. Code §§ 1552 and 1553, this created a presumption that the photographs were authentic, which presumption was not rebutted.

4. The photographs were not hearsay. Hearsay evidence must be offered by a person. The photographs were automatically generated by the computer controlling the system and were thus not hearsay statements offered by a person.

190 5. There is no basis to impose stricter evidentiary requirements on red light camera cases. The standard rules of evidence properly apply in these infraction cases.

California Tow Truck Assn. v. CCSF (2014) 225 Cal.App.4th 846 [discussed at May 2014 City Attorney's Conference]

Take-Away: State law only permits regulation of tow companies and drivers who maintain principal place of business or employment in the local jurisdiction.

Facts: San Francisco requires tow truck businesses and drivers operating in its jurisdiction to obtain permits. The Regulations impose permit application and operation requirements to protect against illegal and untoward conduct. California Tow Truck Association alleged San Francisco's regulations were preempted by federal and state law. The City removed the case to federal court. The federal courts ruled that federal law did not preempt the local regulations. (693 F.3d 847, 928 F.Supp.2d 1157.) The case was remanded back to state court. The Superior Court ruled that the Vehicle Code did not preempt the local regulations. The Court of Appeal reversed.

Holdings & Analysis:

1. The Vehicle Code generally preempts tow truck regulations, but reserves for local jurisdictions authority to regulate "tow truck service or … drivers whose principal place of business or employment" is within the jurisdiction of the local authority. (Veh. Code § 21100(g)(1).) San Francisco asserted this permitted it to regulate based on "substantial or consequential business." The Court disagreed.

a. The plain text of "principal place of business or employment" is clear, and it cannot reasonably be interpreted to mean a nebulous standard as proposed by San Francisco.

b. The Legislature authorizes local regulation of taxis "operated within the jurisdiction" (Gov. Code § 52075.5), which shows the Legislature has elsewhere permitted more expansive local regulation in an analogous context.

c. The legislative history does not support a contrary conclusion. While the Legislature expressed concerns about tow truck operations, it did not express a desire to permit greater regulation than provided for in the statute.

d. The interpretation will not lead to absurd results. To require tow companies and drivers to apply for permits in multiple jurisdictions could be overly burdensome. Local agencies retain extensive authority to regulate tow companies and drivers who principally operate in their jurisdictions, and if they lack authority, the Vehicle Code provides extensive regulations to address local agencies' concerns.

2. Local agencies retain authority under the Rev. & Taxation Code to impose regulatory fees to recover the costs of regulating tow companies and drivers.

191 IX. REGULATING BUSINESSES AND PERSONAL CONDUCT

Rent Control

218 Properties, LLC v. City of Carson (2014) 226 Cal.App.4th 182

Take-Away: Cities shall evaluate the level of support among residents for an application to convert a mobilehome park to a resident-owned park.

Facts: 218 Properties LLC owned a 26-plot mobilehome park where the coach owners do not own the plots and enjoy the benefits of rent control. 218 Properties applied to the City to convert the park into a resident-owned park, pursuant to the Subdivision Map Act (SMA). In order to prevent sham conversions, Gov. Code § 66427.5(d) provides that the applicant must present, and the local agency must consider, a tenant survey gauging support for the conversion. The survey showed that 20 residents opposed the conversion and did not wish to purchase their plots. Five of the remaining six lots were owned by 218 Properties. The City Council determined that the proposed conversion was not bona fide based on lack of support by the residents.

Imperial Avalon owned a 225-unit mobilehome park. It also applied to convert the park into a resident-owned park. Only 86 residents responded to the survey. Eighteen supported the conversion. Forty-six opposed the conversion. The other ballots were blank or submitted too late. The City Council determined that the conversion was not bona fide based on lack of support.

The Superior Court ruled that the City erred in each instance, including because rent control benefits would remain in place for non-purchasers (either because the owner had promised to extend rent control or because low-income rent control provisions would kick-in), and the City improperly gave tenants veto authority over the proposal. The Court of Appeal reversed as to 218 Properties but affirmed as to Imperial Avalon.

Holdings & Analysis:

1. Local agencies must consider the results of the tenant survey when determining, at the public hearing required by the SMA, if the conversion is bona fide.

a. Prior to 2014, subdivision (d) of Gov. Code § 66427.5 vaguely provided that the local agency shall “consider” the results of the tenant survey at the requisite public hearing. Subdivision (e) provides, in turn, that the local agency shall merely determine whether the applicant complied with the requirements of the section 66427.5. In 2009, the First District Court of Appeal ruled that subdivision (e) constrained local agencies from evaluating the survey. Since then, other courts “have concluded that the better view is to allow the local agency” to take the survey results into account, and not to treat as “a mere ministerial task to be checked-off a list of pro forma steps.” These decisions best account for legislative intent.

b. As of January 1, 2014, subdivision (d) has been amended to provide that the agency “may disapprove the map if it finds that the results of the survey had not

192 demonstrated the support of at least a majority of the park’s homeowners.” Thus, the SMA has been clarified to require local agencies to consider tenant preferences going forward. But it also suggests that the Legislature always intended local agencies to evaluate tenant support.

2. The near-unanimous opposition of the 218 Properties tenants to the conversion supports the City’s rejection of the application.

3. The same is not true with respect to Imperial Avalon. The only evidence against its bona fide intent was the survey, and only 46 of the 225 residents opposed the conversion. “This low response was insufficient to show the conversion was a sham.”

4. The City also asserted that it properly rejected Imperial Avalon’s application based on an inadequate Tenant Impact Report (TIR). The argument failed. The City’s review of the TIR is limited to whether it complies with the statutory requirements. The City lacked a reasonable basis to claim the report was incomplete. Moreover, the City had not requested supplemental information.

Camping/Loitering

Desertrain v. City of Los Angeles (9th Cir. 2014) 754 F.3d 1147

Take-Away: An ordinance that prohibits use of vehicles as living quarters, without providing clear standards, is unconstitutionally vague.

Facts: A City ordinance (Ordinance) prohibits use of a vehicle on a City street or parking lot "as living quarters either overnight, day-to-day, or otherwise." A 2008 internal memo directed police officers to make an arrest only after observing a suspect occupying a vehicle for more than one night or three consecutive days. In 2010, the City created a task force to step up enforcement of the Ordinance. PD supervisors instructed officers to look for possessions normally found in a home (e.g., food, bedding, clothing, medicine) and that sleeping in a vehicle was not necessary to violate the Ordinance.

Police officers arrested Plaintiffs, each of whom was homeless, for violating the Ordinance irrespective of whether they were sleeping in their vehicles on City streets. For example, they cited and arrested a plaintiff who had tried to comply with the ordinance, after having been issued a warning, by parking his car, with permission, in a church parking lot when he slept. The officers found personal belongings and bottles of urine in his car but did not see him sleeping in it when he was arrested. Similarly, police officers arrested a plaintiff who was waiting in his car to get out of the rain. They found food, clothing and a bottle of urine in the car. The plaintiff had been sleeping on the sidewalk after having been warned about sleeping in his vehicle.

The District Court granted summary judgment for the City. The Court of Appeals reversed.

193 Holdings & Analysis:

1. The District Court improperly ruled that the City was entitled to summary judgment on the ground that Plaintiffs had failed to raise a void-for-vagueness challenge in their pleadings. Plaintiffs had put the City on notice of this claim and should have been granted leave to amend their pleadings.

2. The Ordinance violates the Due Process Clause because it is "so vague and standardless that it leaves the public uncertain as to the conduct it prohibits."

a. The Ordinance fails to provide adequate notice of the conduct it criminalizes.

i. The fair notice requirement ensures that an ordinary citizen can conform his or her conduct to the law.

ii. The Ordinance provides no guidance as to what it actually prohibits. "Is it impermissible to eat food in a vehicle? Is it illegal to keep a sleeping bag? Canned food? Books? What about speaking on a cell phone? Or staying in a car to get out of the rain?" Plaintiffs tried to comply with the Ordinance, "but there appears to be nothing they can do to avoid violating the statute short of discarding all of their possessions or their vehicles, or leaving Los Angeles entirely."

iii. The Ordinance is similar to an anti-loitering ordinance invalidated by the Supreme Court in 1999 because it vaguely prohibited "remaining in any one place with no apparent purpose." (City of Chicago v. Morales.)

b. The Ordinance promotes arbitrary enforcement targeting the homeless.

i. A statute is also unconstitutionally vague if it encourages arbitrary or discriminatory conduct.

ii. "Arbitrary and discriminatory conduct is exactly what happened here." The Ordinance is so broad it could cover any driver who eats food in his or her vehicle, yet it only appears to have been applied to the homeless.

iii. The City has legitimate health and safety concerns, e.g., regarding dumping of waste, but the concerns do not "excuse the basic infirmity of the ordinance," and "the record plainly shows that some of the conduct plaintiffs were engaged in when arrested … mimics the everyday conduct of many Los Angeles residents."

X. LAND USE

[See CEQA and Land Use Update]

194 XI. PROTECTING THE ENVIRONMENT

[No reported cases]

XII. CODE ENFORCEMENT

[No reported cases]

XIII. LIABILITY AND LITIGATION

Government Claims Act

Gong v. City of Rosemead (2014) 226 Cal.App.4th 363, petition for review filed (June 30, 2014)

Take-Away: Claims presentation requirements of Government Claims Act apply to allegations of intentionally tortious conduct by an elected official.

Facts: According to the Complaint, the City issued Plaintiff approvals to construct an office building. When Plaintiff went to the City to pull a building permit, Mayor John Tran approached Plaintiff and proposed she develop a mixed-used project. Plaintiff opted to try and purchase the additional property. City officials and staff encouraged Plaintiff, and she believed the Mayor’s assurances that the plan would work. The plan required additional land acquisition and discretionary approvals. Plaintiff submitted applications for a general plan amendment, zoning change, design review and conditional use permit.

The Mayor requested and received loans totaling $38,000 from Plaintiff. He did not repay them. The Mayor sought romance. Plaintiff declined. The Mayor retaliated, including by causing the final decision on the mixed-use plan to be tabled.

Plaintiff submitted two Government Code claims. Each asserted that that prior city managers and employees made her purchase the additional property, that Mayor Tran delayed project, and that the City then denied it.

The City denied the claims. Plaintiff filed suit against the City and Tran. The Superior Court sustained the City’s demurrer without leave to amend. The Court of Appeal affirmed.

Holdings & Analysis:

1. The Government Claims Act eliminated all common law liability. Public entities are liable for damages only to the extent declared by statute or required by the federal or state Constitutions.

195 a. Gov. Code § 815.2(a) provides that a public entity is liable for the acts or omissions of its employees within the scope of employment if the acts or omissions would give rise to liability against the employee.

b. The Government Claims Act provides many immunities, including for misrepresentations, and requires the submission of a claim.

2. Gov. Code § 815.3 (added in 1994) provides, inter alia:

a. Unless the elected official and the public entity are codefendants, the entity is not liable for the official’s intentional tort (does not apply to defamation).

b. If the elected official is held liable for an intentional tort (other than defamation), “the trier of fact in reaching the verdict shall determine if the act or omission … arose from and was directly related to” the official’s performance of official duties, in which case the entity will be liable.

c. If the act or omission did not arise out of the performance of official duties, the plaintiff shall first seek recovery of the judgment against the official’s assets. If the assets are insufficient, the court may authorize recovery from the public entity.

3. Section 815.3 does not create a separate cause of action against a public entity. The statutory language and legislative history show legislative intent was to ensure elected officials bear the liability for tortious conduct that does not directly relate to their public service. Only if the assets are insufficient may the plaintiff look to the entity for compensation. Thus, section 815.3 does not create a substantive cause of action.

4. Plaintiff’s Government Code claim did not support the cause of action against the City. The Complaint alleges the Mayor fraudulently promised the City would approve the mixed-use project, extorted $38,000, sexually harassed her, and threatened to kill her. None of these allegations are included in the Government Code claim. The facts alleged in a complaint, including the alleged damages, must be consistent with the Government Code claim. (If the complaint alleges compliance with the claims requirements, the entity may seek judicial notice to show otherwise.) Plaintiff’s Government Code claim was thus an insufficient basis to plead tort claims against the City.

5. The City is immune from the promissory estoppel claim pursuant to Gov. Code § 818.4, which precludes liability for decisions on discretionary permits.

Municipal Liability for Damages and Immunities

Martinez v. County of Ventura (2014) 225 Cal.App.4th 364, review denied (July 16, 2014)

Take-Away: Design immunity does not apply unless the government proves the design received the requisite discretionary approval.

196 Facts: Plaintiff was paralyzed when he crashed his motorcycle into an asphalt berm abutting a raised drain (top-hat drain system). The drain had a steel cover over three legs elevated 8-10 inches off the ground, with a sloped asphalt berm to channel water. Plaintiff alleged a dangerous condition of public property. The County alleged design immunity. The County did not offer evidence of engineering design plans. The evidence showed that in 1990 its road maintenance division had converted the drain inlets to the top-hat design, which has been in common use based on hydraulic efficiency and safety. The jury found for Plaintiff. The Superior Court found the evidence insufficient as a matter of law. The Court of Appeal reversed.

Holdings & Analysis:

1. Gov. Code § 835 provides that a public entity is liable for a dangerous condition if (1) the property was dangerous, (2) the dangerous condition proximately caused the injury, (3) the condition created a foreseeable risk of this kind of injury, and (4) a public employee acting within the scope of employment negligently or wrongfully created the dangerous condition or the public entity had sufficient notice to have protected against it. However, section 830.6 provides for design immunity if (1) the design was adopted by a discretionary approval, (2) there is a causal relationship between the design and the accident, and (3) substantial evidence supports the reasonableness of the design.

2. Design immunity did not apply because the City did not show it adopted the design by a discretionary approval.

a. The agency must show the design was approved “in advance” by the governing body or an employee exercising discretionary authority.

b. The County showed that the top-hat drain system was standard, but it did not show that the design was subject to a discretionary approval. Instead, maintenance workers installed the drains in the field as they saw the need for them. A road maintenance engineer testified that he approved the design, but the County did not show that he had any discretionary approval authority. The County claimed that discretionary approval should be implied from longstanding, consistent use based on efficiency and safety. But there is no authority for an implied discretionary approval, and this theory would improperly expand the scope of this statutory immunity.

Heskel v. City of San Diego (2014) 227 Cal.App.4th 313

Take-Away: In a dangerous condition case, constructive notice requires the plaintiff to establish that the condition was of such an obvious nature that the entity, in the exercise of due care, should have discovered the condition.

Facts: Plaintiff tripped over a hollow metal post protruding from the sidewalk, injuring his wrist and back. He claimed that the condition was dangerous, and that the City had constructive notice of the dangerous condition. The trial court granted the City’s motion for summary judgment. The Court of Appeal affirmed.

197 Holdings & Analysis:

1. A public entity is liable for a dangerous condition of property if the plaintiff establishes (1) the property was dangerous at the time of the injury, (2) the injury was proximately caused by the condition, (3) the condition created a reasonably foreseeable risk of the kind of injury suffered, and (4) the public entity had actual or constructive notice for a sufficient time to prevent it to take protective measures. (Gov. Code § 835.) Constructive notice requires the plaintiff to establish that the condition was of such an obvious nature that the entity, in the exercise of due care, should have discovered the condition. (Gov. Code § 835.2(b).)

2. The City’s declarants established that they had systems for tracking complaints and events associated with dangerous conditions and that there were no records associated with the subject condition. Plaintiff’s declarants showed that the condition had existed for at least a year, and that a sign was subsequently installed in the hollow metal post, but they did not establish that the condition was either obvious or dangerous.

Biron v. City of Redding (2014) 225 Cal.App.4th 1264, petition for review filed (June 10, 2014)

Take-Away: A rule of reasonableness applies to a city’s action or inaction to install or upgrade a storm drain system, which system was inadequate to protect against flooding to plaintiff’s property, under inverse condemnation and dangerous condition law.

Facts: Plaintiffs own an apartment building in downtown Redding. Plaintiffs’ property is near a natural watercourse. Prior to Plaintiffs’ purchase of the apartment building, the adjacent property owner installed a brick wall and floodgates because storm water had previously caused flooding. In addition, the City had installed a storm drain system on and around Plaintiff’s property. The City prepared a storm drain study (Study) to recommend upgrades to its storm drain system for storms of various magnitudes (e.g., 25-year storm and 100-year storm). The City prioritized its needs and adopted a capital improvement program (CIP). Plaintiffs’ neighborhood received the lowest priority based and a recommended level of protection for a 25-year storm. The City lacked sufficient funds for the CIP, which required $7.5 million in Plaintiffs’ neighborhood and $14.5 million elsewhere.

Plaintiffs’ property was flooded in a 100-year storm. The storm system was sufficiently maintained but inadequate to protect against the flooding. Plaintiffs alleged the City was liable for inverse condemnation and dangerous condition of public property. After a court trial, the Superior Court ruled for the City. The Court of Appeal affirmed.

Holdings & Analysis:

1. The City is not liable for inverse condemnation.

a. Standard: a rule of reasonableness applies.

i. Plaintiffs argued that the City was strictly liable. Plaintiffs relied on outdated case law. A rule of reasonableness applies to a government’s alterations or

198 improvements to upstream property, whether to a natural or unnatural watercourse, which cause downstream damage due to increased water flow. This standard avoids punishing governments for installing and maintaining storm water systems and balances public needs and private harms. “[S]trict and open-ended liability for the failure of a project whose overall design, construction, operation and maintenance was reasonable would unduly deter the development of these vital bulwarks against common disaster.”

ii. Six factors are most probative: (1) the public purpose of the project, (2) the degree to which the plaintiff’s loss is offset by reciprocal benefits, (3) the availability of feasible, better alternatives, (4) the severity of the damage in relation to risk-bearing capabilities, (5) the extent to which the damage is a normal risk of property ownership, and (6) the degree to which the damage is peculiar to the plaintiff.

b. The City acted reasonably under these standards. First, there was a public benefit to providing some storm drain capacity to prevent some flooding. Second, Plaintiffs received some benefits from the storm drain system, even though it was insufficient for the 100-year storm. Third, the needs for Plaintiffs’ neighborhood were less than for other neighborhoods, and even if the upgrades had been made, they would have been insufficient. Fourth, Plaintiffs could have purchased insurance or installed floodgates. Fifth, Plaintiffs incurred the risk of flooding by purchasing property near a watercourse. Sixth, there was no evidence that the City consciously flooded Plaintiffs’ property.

c. In addition, Plaintiffs failed to prove that the storm drain system was a substantial cause of their damage. “[T]he storm drain system did not fail, it was simply overwhelmed by the amount of water the storm deposited ….”

2. The City is not liable for a dangerous condition of public property.

a. Standard: Gov. Code § 835 provides that a public entity is liable for a dangerous condition if (1) the property was dangerous, (2) the dangerous condition proximately caused the injury, (3) the condition created a foreseeable risk of this kind of injury, and (4) a public employee acting within the scope of employment negligently or wrongfully created the dangerous condition or the public entity had sufficient notice to have protected against it. However, section 835.4 provides that the entity is not liable if the act or condition that created the condition was reasonable, or the action the entity took or failed to take against the risk was reasonable.

b. The City acted reasonably in installing the storm drain system and in not taking action to upgrade it. Reasons include that the risk of injury was small in relation to the cost of repairs.

199 Taxpayer Standing

Wheatherford v. City of San Rafael (2014) 226 Cal.App.4th 460, petition for review filed (June 26, 2014)

Take-Away: Limitation of taxpayer standing under CCP § 526a to payers of property tax is not a wealth-based classification that violates equal protection.

Facts: Plaintiff, challenging the enforcement practices of the City of San Rafael and County of Marin with respect to the impoundment of vehicles, claimed she had standing to bring the action as a resident taxpayer because she had paid sales tax, gasoline tax, and water and sewage fees in the City and County. Plaintiff conceded that she had not paid any property taxes. The trial court dismissed the action. The Court of Appeal affirmed.

Holdings & Analysis:

1. The Court affirmed Torres v. City of Yorba Linda (1993) 13 Cal.App.4th 1035 and Cornelius v. Los Angeles County etc. Authority (1996) 49 Cal.App.4th 1761, which held that payment of property taxes is required for taxpayer standing under CCP § 526a.

a. The plain language of the statute gives standing to two classes of persons who have been “assessed” taxes: (1) those who are liable to pay an assessed tax but who have not yet paid, and (2) those who paid an assessed tax within one year before the filing of the lawsuit.

b. While courts need not look to legislative intent when a statute is clear on its face, Plaintiff presented (and the Court found) no evidence of legislative intent to suggest a broader interpretation of section 526a.

2. The Court rejected the claim that section 526a creates a wealth-based classification thereby raising constitutional concerns subject to strict scrutiny.

a. Contrary to Plaintiff’s assertions, the Court found that there was no clear correlation between wealth and home ownership (some wealthy may choose to rent, some lower income individuals may have purchased homes when their incomes were higher or inherited property from family members).

b. Assuming, without deciding, that Plaintiff is similarly situated to taxpayers who had standing under section 526a, the rational basis test would apply.

i. The statute must be sustained if the court finds its classification is rationally related to the achievement of a legitimate state purpose. Any conceivable governmental purpose or policy may be considered by the court. The burden falls on the challenger to demonstrate invalidity.

ii. Plaintiff does not contend that the statute serves no conceivable governmental purpose. Further, courts have noted that it is not irrational to limit standing in taxpayer lawsuits. (Cornelius, 49 Cal.App.4th at 1778-79.)

200

Legislative Prayer (Invocation) Policies in the Wake of the U.S. Supreme Court Ruling in Greece v. Galloway

Thursday, September 4, 2014 General Session; 4:00 – 5:15 p.m.

Allison E. Burns, City Attorney, Lancaster

201 Notes:______

202 EGISLATIVE PRAYER POLICIES IN THE WAKE OF TOWN OF GREECE V. GALLOWAY L PRESENTED TO: LEAGUE OF CALIFORNIA CITIES

BY: ALLISON E. BURNS STRADLING YOCCA CARLSON & RAUTH 660 NEWPORT CENTER DRIVE, SUITE 1600 NEWPORT BEACH, CA 92660 DIRECT TEL.: 949 725 4187 [email protected]

I. INTRODUCTION.

In May, 2014, the United States Supreme Court issued its decision on the question of whether sectarian prayers preceding town council meetings, as conducted in the Town of Greece, New York, violated the establishment clause of the United States Constitution. The majority opinion authored by Justice Kennedy and joined by Chief Justice Roberts as well as Justices Alito, Scalia and Thomas held that such prayer practices were constitutionally permissible. This holding is consistent with the recent decision by the Ninth Circuit Court of Appeals in Rubin v. Lancaster, 710 F.3d 1087 (9th Cir. 2013). While the Greece decision answered the immediate question of whether sectarian prayers before council meetings are permissible under the U.S. Constitution, it left open other questions regarding when and to what extent prayer policies and practices might cross the constitutional line into impermissible coercion or proselytizing. In addition, it remains uncertain whether the same invocation practice would withstand scrutiny under unique provisions of the California Constitution.

II. BACKGROUND.

The First Amendment to the United States Constitution, applicable to states by virtue of the Fourteenth Amendment to the United States Constitution, provides, in pertinent part, that “Congress shall make no law respecting an establishment of religion…” (the Establishment Clause). More than three decades ago, the United States Supreme Court held in Marsh v. Chambers, 463 U.S. 783, 103 S. Ct. 3330, 77 L. Ed. 2d 1019 (1983) that the opening of sessions of state legislatures with prayer is deeply embedded in the history and tradition of this country and does not violate the Establishment Clause. Marsh, 463 U.S. at 792. After an extensive review and analysis of the history of legislative prayer, the Marsh Court ultimately held that legislative prayer does not violate the Establishment Clause, reasoning that:

203 In light of the unambiguous and unbroken history of more than 200 years, there can be no doubt that the practice of opening legislative sessions with prayer has become part of the fabric of our society. To invoke Divine guidance on a public body entrusted with making the laws is not, in these circumstances, an ‘establishment’ of religion or a step toward establishment; it is simply a tolerable acknowledgment of beliefs widely held among people of this country.

Id. at 792.

After holding that legislative prayer in general is constitutional, the Marsh Court then considered whether any of the following three specific aspects of the Nebraska Legislature’s practice at issue in Marsh violated the Establishment Clause: (i) the fact that a clergyman of only one denomination (Presbyterian) was selected for sixteen years; (ii) the fact that the chaplain was paid at public expense; and (iii) the fact that the prayers were in the Judeo-Christian tradition. Marsh, 463 U.S. at 792-793.

The Court quickly disposed of any concern related to the chaplain’s sixteen-year tenure because the evidence indicated that the chaplain was reappointed based upon his performance and personal qualities, not his religious views. Id. at 793. The Court also dismissed any concern related to the fact that the chaplain was paid at public expense because such remuneration was grounded in historic practice initiated by the same Congress that drafted the Establishment Clause. Id. at 794.

Lastly, the Court disposed of any concern related to the fact that the prayers were in the Judeo- Christian tradition because, in the words of the Court, “[t]he content of the prayer is not of concern to judges where, as here, there is no indication that the prayer opportunity has been exploited to proselytize or advance any one, or to disparage any other, faith or belief.” Id. This was true regardless of the fact that the prayers were explicitly Christian for fifteen of the chaplain’s sixteen-year tenure. Id. at 793-94. The Court refused to “embark on a sensitive evaluation or to parse the content of a particular prayer” because it found that the prayer opportunity had not been exploited to proselytize or advance any one, or to disparage any other, faith or belief. Id. at 793 n. 14. However, the Court did observe in a footnote that the chaplain had removed all references to “Christ” after receiving a complaint from a legislator; that footnote became the impetus for a myriad of challenges to prayer policies throughout the Nation on the grounds that the true holding of Marsh was that it required legislative prayers to be ‘nonsectarian.’

Those who argued against a ‘non-sectarian’ requirement focused on the Marsh Court’s refusal to parse the content of any single prayer absent a threshold showing that a legislative body has exploited the prayer opportunity to proselytize or to disparage a particular faith or belief. Id. at 794. While the Marsh Court did not explicitly state what constitutes exploitation of the prayer

204 opportunity, it did provide the standard by which exploitation is determined. When the Marsh Court considered whether the selection of a single Presbyterian clergyman by the Nebraska Legislature for sixteen years constituted an exploitation of the prayer opportunity, it looked at the reason for the clergyman’s long tenure. The Marsh Court found that the clergyman’s extended tenure did not constitute an exploitation of the prayer opportunity because the evidence indicated that he was reappointed based upon his performance and personal qualities, not his religious views. Id. at 793. By implication, this means that a legislative body exploits the prayer opportunity only if its policy, practice and/or conduct purposefully and intentionally proselytizes, advances or disparages a faith or belief.

Those who argued for a ‘non-sectarian’ requirement in legislative prayer policies urged that Footnote 14, in which the Court noted that all references to Jesus had been removed by the Nebraska Chaplain in response to a request by one of the legislators, was the deciding factor in the Marsh Court’s decision to uphold the Nebraska Legislature’s practice.

At the time the Supreme Court took up the Town of Greece case, a conflict existed among the circuits regarding the scope of the Marsh holding and whether and to what extent sectarian prayers before council meetings were constitutionally permissible:

• Second Circuit: In Galloway v. Town of Greece, 681 F.3d 20 (2nd Cir. 2012) court held below that “a legislative prayer practice that, however well-intentioned, conveys to a reasonable objective observer under the totality of the circumstances an official affiliation with a particular religion violates the clear command of the Establishment Clause.” Id. at 34. According to the Second Circuit, such a situation existed in Greece because the predominance of prayers offered were associated with a particular creed. Id. The Second Circuit shifted the determinative issue from whether Greece actually exploited the prayer opportunity to whether a reasonable objective observer under the totality of the circumstances would perceive an affiliation with a particular religion. However, the Second Circuit expressly did not “[…] hold that any prayers offered in this context must be blandly ‘nonsectarian.’” Id. at 33-34.

• Fourth Circuit: In Joyner v. Forsyth County, 653 F.3d 341 (4th Cir. 2011), the Forsyth County Board of Commissioners (the “Board”) followed a relatively routine practice (which was reduced to writing in 2007) of compiling and maintaining a database of all religious congregations with an established presence in the community. Id. at 343. The Board’s clerk established and maintained the database by using the Yellow Pages, Internet research, and consultation with the local chamber of commerce. Id. No eligible congregation was excluded and a congregation could confirm its inclusion by writing to the clerk. The clerk updated the database on an annual basis and would then mail an invitation to the leader of each congregation informing those individuals that they could

205 schedule an appointment to deliver an invocation on a first-come, first-served basis. Id. The Board would not schedule any leader for consecutive meetings or for more than two meetings in any calendar year. Id. Other than requesting that invocation speakers not exploit the invocation opportunity as an effort to convert others, or disparage any other faith or belief, the Board took a hands-off approach to the content of invocations. Id. The Court found that since the board formalized its invocation policy in 2007, almost four-fifths (almost 80%) of invocations referred to Jesus, Jesus Christ or Christ and the record included not a single non-Christian prayer. Id. at 344. In holding that Forsyth County’s invocation policy, as implemented, violated the Establishment Clause, the court reasoned that “…the exception created by Marsh is limited to the sort of nonsectarian legislative prayer that solemnizes the proceedings of legislative bodies without advancing or disparaging a particular faith.” Id. at 349. “Put differently, legislative prayer must strive to be nondenominational so long as that is reasonably possible – it should send a signal of welcome rather than exclusion. It should not reject the tenants of other faiths in favor of just one.” Id. Notably, however, the court specifically stopped short of holding that Marsh permits only nonsectarian invocations when it recognized that “[i]nfrequent references to specific deities standing alone, do not suffice to make out a constitutional case.” Id. “But legislative prayers that go further – prayers in a particular venue that repeatedly suggest the government has put its weight behind a particular faith – transgress the boundaries of the Establishment Clause.” Id. Thus, the Fourth Circuit’s “frequency test” was born.

• Ninth Circuit: In Rubin v. City of Lancaster, the Ninth Circuit rejected the argument that a city’s prayer practice, when viewed in context, violated the Establishment Clause because the majority of prayers were Christian. Id. at 1097. In Rubin, the City of Lancaster for years had an informal practice of opening its city council meetings with a citizen-lead prayer. Id. at 1089. In 2009, the city adopted a formal policy that established a two-step process for soliciting prayer-givers. Id. First, the city clerk compiled a list of local congregations by searching the Yellow Pages, Internet and newspaper and consulting the local chamber of commerce. Id. All congregations located within the city were eligible to be on the list and the clerk made no inquiry concerning the faith, denomination or belief of any person or congregation asking to be placed on the list. Id. Second, the city clerk mailed an invitation to each person or congregation appearing on the list to open a city council meeting with a prayer. Id. The city exercised no control over the content of prayers and no person who offered to pray had ever been turned down. Id. Between the date the city formally adopted its prayer policy in 2009 and the date the plaintiffs filed their complaint, twenty (or 77%) of the prayers were given by Christians and each referred to Jesus by name. Id. at 1090. The Ninth Circuit rejected the “reasonable objective observer test” applied by the Second Circuit in

206 Galloway v. Greece, the Ninth Circuit explained that “[b]ypassing the reasonable observer, the Marsh Court instead trained its analysis not only on history but on the government’s actions.” Id. at 1096 (emphasis in original); see also Pelphrey v. Cobb County, 547 F.3d 1263 (11th Cir. 2008). The Ninth Circuit concluded that “[…] the question in this case is not simply whether, given the frequency of Christian invocations, the reasonable observer of Lancaster’s city-council meetings would infer favoritism toward Christianity. Rather, it is whether the City itself has taken steps to affiliate itself with Christianity.” Id. at 1097. Responding to the plaintiffs’ argument that the frequency of Christian prayers had the effect of advancing Christianity, the Ninth Circuit explained that “[t]his argument misconceives the focus of our inquiry. Whatever the content of the prayers or the denomination of the prayer-givers, the City chooses neither.” Id. at 1098. The Ninth Circuit stated, “[t]he [legislative body] cannot control which religious congregations settle within its limits. Nor can it compel leaders of those congregations to accept its invitations.” Id. at 1099.

• Eleventh Circuit: In Pelphrey v. Cobb County, 547 F.3d 1263, 1271-72 (11th Cir. 2008), the Eleventh Circuit upheld Cobb County’s longstanding tradition of opening meetings with clergy invited on a rotating basis. In Cobb County, the clergy list was compiled from multiple sources (yellow pages and internet) and the clergy were randomly selected, but majority Christian (68-70%). The Eleventh Circuit upheld the County’s practice, finding that “Nonsectarian” prayers are not required because such a rule would be contrary to Marsh’s directive that “courts are not to evaluate the content of prayers absent evidence of exploitation.” The Pelphrey court explicitly rejected an argument that Marsh permits only nonsectarian legislative invocations and cautioned that courts should not evaluate the content of legislative invocations absent evidence of exploitation. Pelphrey, 547 F.3d at 1271. In Pelphrey, two county commissions had a long standing tradition of opening their meetings with an invocation by volunteer clergy invited by county personnel on a rotating basis, although the majority of those who delivered an invocation were Christian. Id. at 1267. The commissions did not compose or censor any invocations and did not compensate any of the clergy. Id. During the ten (10) year period preceding the court’s decision, seventy percent (70%) of the invocations before one commission and sixty-eight percent (68%) of the invocations before the other contained Christian references. Id. Invocations often ended with references to “our Heavenly Father” or “in Jesus’ name we pray.” Id. Generally speaking, a list of religious organizations was compiled from several sources, including the Yellow Pages, the Internet and business cards, and then a speaker was randomly selected. Id. Applying Marsh, the Pelphrey court rejected an argument that legislative invocations must be nonsectarian, explaining that such a rule would be “…contrary to the command of Marsh that courts are not to evaluate the content of prayers absent evidence of exploitation” and

207 that “[t]o read Marsh as allowing only nonsectarian prayers is at odds with the clear directive by the Court that the content of a legislative prayer ‘is not of concern to judges where…there is no indication that the prayer opportunity has been exploited to proselytize or advance any one…faith or belief.’” Id. at 1271. Ultimately, the Pelphrey court concluded that the identity of the speakers and the invocations at issue, when compared to what was permitted in Marsh, taken as a whole did not advance any particular faith. Id. at 1277-1278.

In the context of this split among the Circuits, the Supreme Court granted certiorari in the Greece v. Galloway case in 2013.

III. THE TOWN OF GREECE V. GALLOWAY DECISION. A. Opinion of the Court.

The majority opinion was authored by Justice Kennedy and joined by Chief Justice Roberts as well as Justices Alito, Scalia and Thomas. The Court’s analysis centered on the Marsh decision and the historical practice throughout the United States of commencing governmental meetings with prayers. The Court focused its analysis on whether the Town’s prayer practice fit within the historical tradition upheld in Marsh. The Court disposed of the argument that prayers must be nonsectarian as inconsistent with the tradition of legislative prayer described in the Court’s cases. The court noted that today Congress continues to allow sectarian prayer, “[Congress] acknowledges our growing diversity not by proscribing sectarian content but by welcoming ministers of many creeds.” Marsh at 10 (citing prayers by Dalai Lama, Rabbi, Hindu leader, and Imam). The majority dismissed the argument that Allegheny’s citation to the Marsh decision’s Footnote 14 to require nonsectarian prayer as dictum “that was disputed when written and has been repudiated by later cases.” Id. at 11. The Court went on to state Marsh “nowhere suggested that the constitutionality of legislative prayer turns on the neutrality of its content.” Id. at 12.

The Court emphasized that a nonsectarian requirement would force legislatures and courts to become “supervisors and censors of religious speech” and queried whether consensus could ever be “reached as to what qualifies as generic or nonsectarian.” Id. at 13. The titles, Lord of Lords, King of Kings, God, Lord God and Almighty may alienate nonbelievers and because the “First amendment is not a majority rule… once it invites prayer into the public sphere, government must permit a prayer giver to address his or her own God or gods as conscience dictates, unfettered by what an administrator or judge considers to be nonsectarian.” Id. at 14.

208 The opinion provided some guidance as to the critical elements of a constitutional prayer policy:

• Given at the session opening; • To lend gravity to the occasion; • Reflecting the values of the Nation; • Given in a solemn and respectful tone; • Inviting lawmakers to reflect on shared ideals and common ends; and • No discrimination among faiths.

The plurality also provided guidance as to what pattern of activity will render a policy unconstitutional:

• Denigration/disparagement of any religion; • Threatened damnation; • Preaching conversion; or • Proselytizing or advancing any faith or belief.

The court reiterated that Marsh mandates inquiry into the prayer opportunity as a whole, rather than the content of a single prayer.

B. PLURALITY.

The portion of Justice Kennedy’s opinion in which he analyzed the coercion argument proffered by the Respondents of was joined only by Chief Justice Roberts and Justice Alito. In this portion of the opinion, Justice Kennedy considered the historical practice of legislative prayers at Greece’s town council meetings and found without merit the Respondents’ argument that prayers at town meetings are different than prayers at State Legislatures and Congress because of the coercive effect of the intimate setting of local town councils and their role in granting or denying permits, business licenses and zoning variances. While Justice Kennedy reiterated that “government may not coerce its citizens ‘to support or participate in any religion or its exercise,’” he found that the practice in Greece of offering a “brief, solemn and respectful prayer to open its monthly meetings [did not compel] its citizens to engage in a religious observance.” Id at 18-19.

Justice Kennedy noted that the reasonable observer of legislative prayers understands that their purpose is to lend gravity to public proceedings and acknowledge the role of religion in society…not to proselytize any particular faith or belief. Id.

209 Justice Kennedy provided some guidance as to what councils should not do as part of their prayer practices:

• Direct the public to participate (e.g. stand, bow head, etc.); • Single out dissidents for opprobrium; • Indicate decisions might be influenced by acquiescence in prayer opportunity; • Classify citizens based on religious views; • Chastise dissenters; • Attempt “lengthy disquisition on religious dogma”; • Refuse any request to offer a prayer; and • Schedule prayer in temporal proximity to administrative or quasi-judicial activities.

C. ALITO CONCURRENCE.

Justice Alito wrote a separate concurrence in which he responded to Justice Kagan’s dissent. Justice Scalia joined this concurrence. Justice Alito first focused on the factual background of the Town of Greece prayer policy, delineating the salient facts of the Town’s practice: a clerical employee randomly called religious organizations listed in the town’s “Community Guide” published by the Chamber of Commerce until she located someone willing to give the invocation. She ultimately created a list of those who had agreed to give the invocation. All of the congregations in the Community Guide were Christian churches. Christians predominate the population of the County in which the Town is located. Individuals of the Jewish faith are the next most populous group, at 3% of the County population. There are no synagogues within the borders of the town. As a result, for some time all the prayers were offered by Christian clergy. After complaints were received, “the town made it clear that it would permit any interested residents, including nonbelievers, to provide an invocation, and the town has never refused a request to offer an invocation.” The prayers were given at the beginning of the meeting before the ‘legislative’ portion of the meeting began – and separate from the portion of the meeting at which the council considered formal requests for variances or other adjudicatory matters.

Justice Alito next turned to the dissent’s description of the two ways that the town could have avoided any constitutional problem: a) requiring non-sectarian prayers; or b) inviting clergy of many faiths. With regard to the first approach, Justice Alito points out that “there is no historical support for the proposition that only generic prayer is allowed” and notes that “as our country has become more diverse, composing a prayer that is acceptable to all members of the community who hold religious beliefs has become harder and harder.” Further, Justice Alito queried how far the town may go in enforcing a non-sectarian prayer policy – screening/editing prayers? Post-delivery review and possible ‘discipline’ of noncompliant prayer givers?

210 With regard to the dissent’s argument that the town should “invite clergy of many faiths,” Justice Alito argues that “the principal dissent’s quarrel with the town of Greece really boils down to this: The town’s clerical employees did a bad job in compiling the list of potential guest chaplains.” I.e. the employee created the list of congregations using the town directory “instead of a directory covering the entire greater Rochester area.” Justice Alito takes issue with the sweeping tone of the Kagan dissent and argues that the historical practice of legislative prayers is consistent with the Town of Greece’s approach.

D. THOMAS CONCURRENCE.

Justice Thomas wrote a separate concurring opinion arguing that the establishment clause is a federalism provision that is inapplicable to the states and, therefore, inapplicable to the Town of Greece.

E. BREYER DISSENT.

In his brief dissent, Justice Breyer stated his concurrence with the Second Circuit’s decision below and noted that the policy in the Town of Greece was not sufficiently inclusive and the town undertook no significant effort to inform the non-Christian houses of worship located in the vicinity of the town of the prayer opportunity. He urged the town to have its prayer-givers follow the U.S. House of Representatives’ guidelines:

The guest chaplain should keep in mind that the House of Representatives is comprised of Members of many different faith traditions.

The length of the prayer should not exceed 150 words.

The prayer must be free from personal political views or partisan politics, from sectarian controversies, and from any intimations pertaining to foreign or domestic policy.

F. KAGAN DISSENT.

Justice Kagan wrote a strong dissent in which she was joined by Justices Ginsberg, Breyer and Sotomayor, finding that the town’s prayers “violate that norm of religious equality—the breathtakingly generous constitutional idea that our public institutions belong no less to the Buddhist or Hindu than to the Methodist or Episcopalian.” Justice Kagan argues that the facts in the Town of Greece are distinguishable from Marsh in that the participants at town council meetings are all ordinary citizens, the invocations were predominantly sectarian, the town board did nothing to recognize religious diversity or reach out to non-Christians, the prayer-giver addressed the public, not the legislative body, the town board has a quasi-judicial role, the town

211 board is the primary means by which local citizens have the opportunity to petition their government and the prayers were constantly and exclusively Christian in nature.

Justice Kagan set forth a series of hypotheticals in which prayers from the record before the court are given in various governmental settings: before a trial, at a polling place on election day and at a naturalization ceremony. She argued that the government in each hypothetical “has aligned itself with, and placed its imprimatur on, a particular creed.” Justice Kagan focused on the hybrid role of the town council – both legislative and quasi-adjudicatory. This hybrid role required the town council “to exercise special care to ensure that the prayers offered are inclusive – that they respect each and every member of the community as an equal citizen” and she found that they failed to do so. She further argued that a state legislature (as in Marsh) differs from the town council in Greece as to the nature and purpose of the meeting, the composition of the audience as well as prayer content and character. These differences caused Justice Kagan to conclude that the prayer policy in Greece failed to meet the principles of religious neutrality such that each person “experience[s] a government that belongs to one and all, irrespective of belief.”

Instead, Justice Kagan would require that the town council:

• Require prayers that “Seek to include rather than divide;” • Invite clergy of all faiths; • Require non-sectarian prayers; • Publicize inclusiveness; and • Offer a role to non-Christians.

G. CALIFORNIA CONSTITUION AND THE TOWN OF GREECE DECISION

The Town of Greece court did not address the requirements of the California constitution as they impact legislative invocations. Nor has the California Supreme Court taken up this issue. Therefore, a binding decision regarding the constitutionality of legislative invocations under the California Constitution remains to be rendered. However, the Ninth Circuit did recently address challenges to the City of Lancaster’s legislative invocation policy based, in part, on the California Constitution. Rubin v. Lancaster, 710 F.3d 1087 (9th Cir., 2013). The Rubin plaintiffs unsuccessfully challenged the City of Lancaster’s invocation policy based on the United States Constitution’s Establishment Clause, as well as three provisions of the California Constitution: (i) the California Establishment Clause; (ii) the No Aid clause; and (iii) the No Preference clause. Each of these provisions of the California Constitution is addressed briefly below.

212 1. The California Establishment Clause

In Rubin v. Lancaster, the Ninth Circuit found that the California Establishment clause is coextensive with the Establishment Clause set forth in the United States Constitution. The Ninth Circuit quoted the California Supreme court’s decision in E. Bay Asian Local Dev.Corp. v. California, 24 Cal. 4th 693 (2000) and stated:

“The ‘protection against the establishment of religion embedded in the California Constitution [does not] create[] broader protections than those of the First Amendment,’ given that ‘the California concept of a “law respecting an establishment of religion” coincides with the intent and purpose of the First Amendment establishment clause.’” citing E. Bay Asian Local Dev. Corp. v. California, supra, 24 Cal. 4th at 698.

Based upon this brief analysis and its extensive analysis of the Lancaster policy under Federal Establishment Clause jurisprudence, the Ninth Circuit rejected all of Rubin’s challenges to the City of Lancaster’s invocation policy based on the California Constitution.

2. The California “No Aid” Clause

The California Constitution’s “No Aid” clause is found in Article XVI, Section 5 and states:

Neither the Legislature, nor any county, city and county, township, school district, or other municipal corporation, shall ever make an appropriation, or pay from any public fund whatever, or grant anything to or in aid of any religious sect, church, creed, or sectarian purpose, or help to support or sustain any school, college, university, hospital, or other institution controlled by any religious creed, church, or sectarian denomination whatever; nor shall any grant or donation of personal property or real estate ever be made by the State, or any city, city and county, town, or other municipal corporation for any religious creed, church, or sectarian purpose whatever . . . .

213 Legislative prayer programs that meet the Town of Greece decision’s requirements will not include any appropriation or payment from any public fund to legislative prayer givers; nor will such a program “grant anything to or in aid of any religious sect, church [or] creed.” Thus, the analysis will rest upon whether the very existence of legislative invocations constitutes a “grant [of] anything to or in aid of any … sectarian purpose.”

To date, while the Ninth Circuit has rejected a challenge to a legislative invocation policy based upon the California Constitution’s “No Aid” provision, the California Supreme Court has not taken up this issue. Therefore, recent California caselaw discussing the ‘No Aid’ provision in contexts other than legislative invocations is the best guidance presently available on this issue. In East Bay Asian Local Development Corporation v. California, supra, 24 Cal.4th 693, the California Supreme Court rejected a challenge to provisions of the government code that granted noncommercial property owned by religious organizations an exemption from historic landmark designation and regulation. The Court held that while exempting property from landmark designation requirements grants a benefit as compared to other properties subject to such designation, “neither the state nor the local governmental entity expends funds, or provides any monetary support, for the exempted property or its owner.” Id. at 721. Similarly, in jurisdictions that adopt legislative invocation programs in compliance with Town of Greece, no expenditure of funds or monetary support will be given to prayer-givers.

In California Statewide Communities Development Authority v. All Persons Interested etc., 40 Cal. 4th 788 (2007), the California Supreme Court rejected a challenge to a school financing program that would provide funding to build and improve campus facilities on the campus of religious schools in addition to non-religious schools. The Court found no violation of the “No Aid” clause because that clause “has never been interpreted…to require governmental hostility to religion, nor to prohibit a religious institution from receiving an indirect, remote, and incidental benefit from a statute which has a secular primary purpose. …” The Court found that the bond funding program had the secular purpose of providing education in secular subjects, did not result in indoctrination of students, and contained sufficient restrictions to prevent an excessive entanglement between the State and the religious schools.

In the context of legislative invocation programs, the argument in support of constitutionality will center on whether the amply documented historic purpose of solemnizing governmental proceedings, as described in depth in Marsh v. Chambers and Town of Greece v. Galloway, is adequate to uphold the constitutionality these policies. Instructive in that analysis will be the three part test set forth in Lemon v. Kurtzman, 403 U.S. 602 (1971), i.e. does the government conduct at issue: “(1) have a secular purpose, (2) have a primary effect that neither advances nor inhibits religion, and (3) not foster an excessive government entanglement with religion.” Barnes-Wallace v. City of San Diego, 704 F.3d 1067, 1082-83 (9th Cir. 2012), citing Lemon, supra. As noted above, the secular purpose of legislative invocation policies to solemnize governmental proceedings is well and amply documented. Similarly, programs that comply with

214 the Town of Greece decision will not foster government entanglement with religion as the government will have no role in the content of the invocations. The question will thus come down to whether the policy has a “primary effect that neither advances nor inhibits religion.” This is a question yet to be litigated; however, a policy that allows atheist or agnostic organizations to provide invocations to solemnize governmental proceedings (as provided in brackets in the form of policy enclosed with this paper) would neither advance nor inhibit religion and, therefore, be most strategically placed to fend of constitutional challenges under the California “No Aid” clause.

3. The California ‘No Preference’ Clause

The California Constitution’s “No Preference” clause is found in Article I, Section 4 and states:

Free exercise and enjoyment of religion without discrimination or preference are guaranteed…

Legislative prayer programs that meet the requirements set forth in the Town of Greece decision will, of necessity, meet the standard of ‘no discrimination’ and ‘no preference’ among religions as required by the California constitution.

H. WHAT’S NEXT.

Some predictions of the trajectory of future challenges to legislative prayers:

• California Constitution challenges – especially “No Aid”; • Further challenges based on “coercion” theory; • Challenges directly to Marsh; • Challenges to cities’ prohibitions on sectarian prayers and/or references to specific deities in prayers; and • Challenges as to what constitutes “a pattern of prayers that over time denigrate, proselytize, or betray an impermissible government purpose”.

215 POLICY REGARDING INVOCATIONS AT MEETINGS OF THE CITY COUNCIL OF THE CITY OF ______

WHEREAS, the City Council is an elected legislative and deliberative public body, serving the citizens of the City of ______; and

WHEREAS, legislative bodies in America have long maintained a tradition of solemnizing proceedings by allowing for an opening prayer before each meeting, for the benefit and blessing of the City Council; and

WHEREAS, since the incorporation of the City, the City Council has followed a practice of selecting a member of local clergy to provide invocations at City Council meetings; and

WHEREAS, the City Council now desires to adopt this formal, written policy to clarify and codify its invocation practices; and

WHEREAS, such prayer before deliberative public bodies has been consistently upheld as constitutional by American courts, including the United States Supreme Court; and

WHEREAS, in Marsh v. Chambers, 463 U.S. 783 (1983), the United States Supreme Court rejected a challenge to the Nebraska Legislature’s practice of opening each day of its sessions with a prayer by a chaplain paid with taxpayer dollars, and specifically concluded, “The opening of sessions of legislative and other deliberative public bodies with prayer is deeply embedded in the history and tradition of this country. From colonial times through the founding of the Republic and ever since, the practice of legislative prayer has coexisted with the principles of disestablishment and religious freedom.” Id., at 786; and

WHEREAS, the Supreme Court further held, “To invoke divine guidance on a public body. . . is not, in these circumstances, an ‘establishment’ of religion or a step toward establishment; it is simply a tolerable acknowledgment of beliefs widely held among the people of this country.” Id., at 792; and

WHEREAS, the Supreme Court affirmed in Lynch v. Donnelly, 465 U.S. 668 (1984), “Our history is replete with official references to the value and invocation of Divine guidance in deliberations and pronouncements of the Founding Fathers and contemporary leaders.” Id., at 675; and

WHEREAS, the Supreme Court further stated, “Those government acknowledgments of religion serve, in the only ways reasonably possible in our culture, the legitimate secular purposes of solemnizing public occasions, expressing confidence in the future, and encouraging the recognition of what is worthy of appreciation in society. For that reason, and because of their history and ubiquity, those practices are not understood as conveying government approval of particular religious beliefs.” Id., at 693 (O’Connor, J., concurring); and

216 WHEREAS, the Supreme Court also famously observed in Zorach v. Clauson, 343 U.S. 306, (1952), “We are a religious people whose institutions presuppose a Supreme Being.” Id., at 313-14; and

WHEREAS, the Supreme Court acknowledged in Holy Trinity Church v. United States, 143 U.S. 457 (1892), that the American people have long followed a “custom of opening sessions of all deliberative bodies and most conventions with prayer ...,” Id., at 471; and

WHEREAS, the Supreme Court has determined, “The content of [such] prayer is not of concern to judges where … there is no indication that the prayer opportunity has been exploited to proselytize or advance any one, or to disparage any other, faith or belief.” Marsh, 463 U.S. at 794-795; and

WHEREAS, the Supreme Court also proclaimed that it should not be the job of the courts or deliberative public bodies “to embark on a sensitive evaluation or to parse the content of a particular prayer” offered before a deliberative public body. Id.; and

WHEREAS, the Supreme Court has counseled against the efforts of government officials to affirmatively screen, censor, prescribe and/or proscribe the specific content of public prayers offered by private speakers, as such government efforts would violate the First Amendment rights of those speakers. See, e.g., Lee v. Weisman, 505 U.S. 577, 588-589 (1992); and

WHEREAS, the Supreme Court has recently held in a plurality opinion in Town of Greece v. Galloway 572 U.S. ___ (2014) that “absent a pattern of prayers that over time denigrate, proselytize, or betray an impermissible government purpose…” a prayer policy passes constitutional muster; and

WHEREAS, the City Council intends, and has intended in past practice, to adopt a policy that upholds an individual’s “free exercise” rights under the First Amendment; and

WHEREAS, the Supreme Court has repeatedly clarified that “there is a crucial difference between government speech endorsing religion, which the Establishment Clause forbids, and private speech endorsing religion, which the Free Speech and Free Exercise Clauses protect.” Bd. of Educ. of Westside Cmty. Sch. v. Mergens, 496 U.S. 226, 250 (1990); and

WHEREAS, the City Council intends, and has intended in past practice, to adopt a policy that does not proselytize or advance any faith, or show any purposeful preference of one religious view to the exclusion of others; and

WHEREAS, the City Council recognizes its constitutional duty to interpret, construe, and amend its policies and ordinances to comply with constitutional requirements as they are announced; and

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of ______, California that the City Council does hereby adopt the following written policy regarding opening invocations before meetings of the City Council, to wit:

217 1. In order to solemnize proceedings of the City Council and its subsidiary bodies, it is the policy of the City Council to allow for an invocation or prayer to be offered at its meetings for the benefit of the City Council, commission members and the community.

2. No member of the City Council members of any City Commission or City employee or any other person in attendance at the meeting shall be required to participate in any prayer that is offered.

3. The prayer shall be voluntarily delivered by an eligible member of the clergy/religious leader in the City of ______. To ensure that such person (the “invocational speaker”) is selected from among a wide pool of the City’s clergy/religious leaders, on a rotating basis, the invocational speaker shall be selected according to the following procedure:

a. The City Clerk shall compile and maintain a database (the “Congregations List”) of the religious congregations with an established presence in ______.

b. The Congregations List shall be compiled by referencing the listing for “churches,” “congregations,” or other religious assemblies [religious, atheist or agnostic groups or assemblies (collectively “Assemblies”)] in the annual Yellow Pages phone book(s) published for the City of ______, research from the Internet, and consultation with local chambers of commerce. All [religious congregations] [Assemblies] with an established presence in the local community of ______are eligible to be included in the Congregations List, and any such congregation can confirm its inclusion by written request to the Clerk.

c. The Congregations List shall also include the name and contact information of any chaplain who may serve one or more of the fire departments or law enforcement agencies of the City of ______or any nearby military facilities.

d. The Congregations List shall be updated, by reasonable efforts of the City Clerk, in November of each calendar year.

e. Within thirty (30) days of the effective date of this policy, and on or about December 1 of each calendar year thereafter, the City Clerk shall mail an invitation addressed to the “congregation leader” of each congregation listed on the Congregations List, as well as to the individual chaplains included on the Congregations List.

f. The invitation shall be dated at the top of the page, signed by the City Clerk at the bottom of the page, and read as follows:

218 Dear congregation leader,

The City Council makes it a policy to invite members of the clergy in the City of ______to voluntarily offer a prayer before the beginning of its meetings, for the benefit and blessing of the City Council. As the leader of one of the congregations with an established presence in the local community of the City of ______, or in your capacity as a chaplain for one of the fire departments or law enforcement agencies of the City of ______, you are eligible to offer this important service at an upcoming meeting of the City Council.

If you are willing to assist the City Council in this regard, please send a written reply at your earliest convenience to the City Clerk at the address included on this letterhead. Clergy are scheduled on a first-come, first- serve or other random basis. The dates of the City Council’s scheduled meetings for the upcoming year are listed on the following, attached page. If you have a preference among the dates, please state that request in your written reply.

This opportunity is voluntary, and you are free to offer the invocation according to the dictates of your own conscience. To maintain a spirit of respect and ecumenism, the City Council requests only that the prayer opportunity not be exploited as an effort to convert others to the particular faith of the invocational speaker, nor to disparage any faith or belief different than that of the invocational speaker.

On behalf of the City Council, I thank you in advance for considering this invitation.

Sincerely, City Clerk

g. Consistent with paragraph 6 hereof and, as the invitation letter indicates, the respondents to the invitation shall be scheduled on a first-come, first-served or other random basis to deliver the prayers.

h. If the selected invocational speaker does not appear at the scheduled meeting, the Mayor (or commission chairperson) may ask for a volunteer from among the Council (or commissioners) or the audience to deliver the invocation.

5. No invocational speaker shall receive compensation for his or her service.

6. The City Clerk shall make every reasonable effort to ensure that a variety of eligible invocational speakers are scheduled for the City Council meetings. In any event, no invocational speaker shall be scheduled to offer a prayer at consecutive meetings of the City Council, or at more than three (3) City Council meetings in any calendar year.

219 7. Neither the City Council, City Commissioners, nor the City Clerk shall engage in any prior inquiry, review of, or involvement in, the content of any prayer to be offered by an invocational speaker.

8. This policy shall be intended for all Boards and Commissions of the City of ______, California.

9. This policy in not intended, and shall not be implemented or construed in any way, to affiliate the City Council with, nor express the City Council’s preference for, any faith or religious denomination. Rather, this policy is intended to acknowledge and express the City Council’s respect for the diversity of religious denominations and faiths represented and practiced among the citizens of ______.

NOW, THEREFORE, BE IT FURTHER RESOLVED that this policy shall become effective immediately upon approval by the City Council of the City of ______.

ATTEST: APPROVED:

______City Clerk Mayor

City of ______City of ______

220

Elimination of Bias Related to Religion (MCLE specialty Credit for Elimination of Bias in the Legal Profession)

Friday, September 5, 2014 General Session; 8:00 – 10:00 a.m.

J. Scott Tiedemann, Liebert Cassidy Whitmore

221 Notes:______

222

ELIMINATION OF RELIGIOUS BIAS IN THE PRACTICE OF LAW

J. Scott Tiedemann and Christina Rentz

Liebert Cassidy Whitmore

Introduction

Religion is a deeply personal, often sensitive and sometimes controversial topic that

engenders strong feelings. Attorneys may share these feelings, but California Rule of

Professional Conduct 2-400 prohibits a member from unlawfully discriminating or knowingly

permitting unlawful discrimination on the basis of religion in the management or operation of a

law practice. This paper introduces California attorneys to the laws prohibiting religious

discrimination, explores how these laws and duties impact management of a law practice, and

discusses strategies a law office can implement to comply with its legal and professional duties.

II.

Religious Bias in the United States

Allegations of religious bias are abundant in the United States. According to the Federal

Bureau of Investigation, one in five hate crimes reported in 2012 were due to religious bias,

stemming mostly from anti-Semitic (59.7%) and anti-Islamic (12.8%) prejudice.1 Immediately

1 Federal Bur. of Investigation Crim. Justice Information Services Div. (2013) 2012 Hate Crime Statistics, Incidents and Offenses < http://www.fbi.gov/about-us/cjis/ucr/hate-crime/2012/topic-pages/incidents-and- offenses/incidentsandoffenses_final> (as of July 21, 2014) & Table 1: Incidents, Offenses, Victims, and Known Offenders by Bias Motivation

223

following the 9-11 attacks, the number of religion-based discrimination claims involving

Muslims reported to the Equal Employment Opportunity Commission (“EEOC”) increased by

250% percent, and the total number of reported religion-based discrimination claims has steadily

increased since.2 Indeed, the agency itself filed nearly 90 lawsuits in the past decade predicated

on religious discrimination against Muslim, Sikh, Arab, Middle Eastern, and South Asian

communities.”3

The legal community is not immune from allegations of religious bias. Some fear the

religious beliefs of judges impair their ability to impartially adjudicate certain cases. For

example, when five out of the six Roman Catholic justices on the Supreme Court upheld a closely-held corporation’s challenge to the contraception requirement of the Affordable Care Act in Burwell v. Hobby Lobby, some in the media decried the decision as religiously motivated.

The New York Times published an article questioning the influence of the justices’ religion on their decision and suggested that the Roman Catholic justices were less impartial than their

Jewish colleagues.4 Even federal judge Richard George Kopf weighed in on the effect he

believes the decision would have on perceptions of the justice system: “The decision looks religiously motivated because each member of the majority belongs to the Catholic Church, and

datadeclarations/1tabledatadecpdf/table_1_incidents_offenses_victims_and_known_offenders_by_bias_m otivation_2012.xls> (as of July 21, 2014). 2 Equal Employment Opportunity Com., What You Should Know about the EEOC and Religious and National Origin Discrimination Involving the Muslim, Sikh, Arab, Middle Eastern and South Asian Communities (as of July 21, 2014); Equal Employment Opportunity Commission, Charge Statistics FY 1997 Through FY 2013 (as of July 21, 2014). 3 Bean, Rise in religious bias claims forces analysis of a multitude of sins (April 20, 2014) HR Hero (as of July 21, 2014). 4 Freedman, Among Justices, Considering a Divide Not of Gender or Politics, but of Beliefs, The New York Times (July 12, 2014) p. A13.

224

that religious organization is opposed to contraception.”5

Religious bias may also impact the participation of religious minorities in the legal profession. In 2011, when Governor Christie appointed Sohail Mohammed, an Indian-American of Islamic faith, to a Superior Court judgeship in New Jersey, a contentious confirmation hearing ensued, with New Jersey Senators inquiring into Mr. Mohammed’s opinions about Hamas, the

Muslim community’s perceived ambivalence to terrorism, and Sharia law.6 Similarly, when the first Muslim American judge was appointed to the bench in California in 2012, at least one critic unreasonably wondered if he would “lock up jihadis, honor killers, and those who assault nonbelievers as quickly as he does gang bangers.”7

III.

Laws Prohibiting Religious Bias

Laws aimed at eradicating religious bias and discrimination exist at both the state and federal level. Specifically, Title VII of the 1964 Civil Rights Act and the California Fair

5 Kopf, Remembering Alexander Bickel’s Passive Virtues and the Hobby Lobby cases (July 5, 2014) (as of July 21, 2014). 6 Sohrabji, New Jersey Gets Its First Muslim American Judge (August 4, 2011) The Muslim Observer (as of July 21, 2014); Lowery, Not exactly New Jersey at its best, Herald News (July 1, 2014) (as of July 21, 2014); Martel , Christie Defends Appointing Muslim Judge: ‘This Sharia Law Business is Crap’ (August 3, 2011) Mediaite, LLC (as of July 21, 2014). 7Sohrabji, Brown Appoints California’s First Muslim Superior Court Judge, IndiaWest (June 26, 2014) (as of July 21, 2014); California’s first Muslim Superior Court Judge Led Muslim Brotherhood-founded Student Group (July 11, 2012) (as of July 21, 2014).

225

Employment and Housing Act prohibit discrimination against individuals based upon protected

classes, including religion.8 The Unruh Civil Rights Act also prohibits businesses of all types

from discriminating against, refusing services or facilities to, and otherwise declining to do

business with individuals based on protected characteristics, including religion.9

Public law offices operating within a state or federal government must also comply with

the additional constitutional protections conferred by the First Amendment’s Free Speech

Clause, which prohibits the government’s undue restriction of religious speech,10 Free Exercise

Clause, which prohibits state action that substantially burdens religion,11 and Establishment

Clause, which prohibits state action that unduly entangles government and religion or endorses

or inhibits a religion.12

Defining Religion

“Religion,” as defined by Title VII, FEHA, and the Unruh Civil Rights Act broadly

encompasses all aspects of religious belief, observance and practice which an individual

sincerely holds, including religious dress and grooming practices.13 Religious beliefs warranting

protection need not be “acceptable, logical, consistent, or comprehensible to others,” nor widely

8 42 U.S.C.A. § 2000e-2 ; Gov. Code, § 12940. 9 Civ. Code, § 51. 10 Widmar v. Vincent (1981) 454 U.S. 263; DiLoreto v. Downey Unified School District (1999) 196 F.3d 958. 11 Hernandez v. Commissioner of Internal Revenue, 490 U.S. 680, 699; Smith v. Fair Employment & Housing Com., 12 Cal.4th 1143, 1166–67, 51 Cal.Rptr.2d 700, 913 P.2d 909 (1996). 12 DiLoreto v. Board of Education of the Downey Unified School District (1999) 74 Cal.App.4th 267, 275; Lemon v. Kurtzman (1971) 403 U.S. 602, 612; Edwards v. Aguillard (1987) 482 U.S. 578, 616. 13 42 U.S.C. § 2000(e)(j); Gov. Code, § 12969, subd. (q); Civ. Code § 51, subd. (e)(4)

226

followed.14 These laws protect traditional, organized religions, as well as “religious beliefs that

are new, uncommon, not part of a formal church or sect” or “only subscribed to by a small number of people.”15 Indeed, not even the belief in a Supreme Being or power is a necessary

prerequisite, and non-theistic beliefs such as atheism are as equally deserving of protection under

these laws as traditional religions whose tenets mandate belief in a higher power.16

Under Title VII, an individual’s beliefs qualify as “religion” if they are sincerely held and

religious in his or her own scheme of things.17 EEOC guidelines further define religious practices

to include any “set of moral or ethical beliefs as to what is right and wrong where such beliefs

are sincerely held with the strength of traditional religious views.” This capacious definition

“leaves little room to challenge the religious nature of an employee’s professed beliefs.”18

California courts, however, have not adopted such an expansive construction and

arguably employ a more restrictive definition of what constitutes religion and religious practices.

California courts employ a three part test which examines: (1) whether the belief addresses

fundamental and ultimate questions having to do with deep and imponderable matters, such as

the meaning and purpose of life and theories of humans’ place in the universe (2) whether the

belief is comprehensive in nature, consisting of a belief system as opposed to an isolated

14 Freidman v. Southern Cal. Permanente Medical Group (2002) 102 Cal.App.4th 39, 57-58; 29 C.F.R. § 1605.1. 15 Equal Employment Opportunity Commission, Religious Garb and Grooming in the Workplace: Rights and Responsibilities (March 6, 2014) (as of July 21, 2014); 29 C.F.R. § 1605.1; Equal Employment Opportunity Com. v. Abercrombie & Fitch Stores, Inc. (10th Cir. 2013) 731 F.3d 1106, 1117; Friedman, 102 Cal.App.4th at 58. 16 Young v. Southwestern Sav. & Loan Ass’n (5th Cir. 1975) 509 F.2d 140. 17 Friedman, 102 Cal.App.4th at 57-58;Eatman v. United Parcel Service (S.D.N.Y. 2002) 194 F.Supp.2d 256, 268; Telfair v. Federal Exp. Corp. (S.D. Fla. 2013) 934 F.Supp.2d 1368, 1382; Brown v. F.L. Roberts & Co. (D. Mass. 2006) 419 F.Supp.2d 7, 12. 18 Brown, 419 F.Supp.2d at 12.

227

teaching, and (3) whether the belief can be recognized by certain formal and external signs,

although the absence of such signs will not necessary preclude a finding of “religion.”19

An instructive example of the difference in “religion” under Title VII compared to

FEHA can be found in cases deciding whether veganism constitutes a religion. Utilizing the

three part test described above, the court in Friedman v. Southern Cal. Permanente Medical

Group found that, “while veganism compels an individual to live in accord with strict dictates of behavior,” it does not fall within the provisions of FEHA because (1) “it reflects a moral and secular, rather than religious, philosophy” (2) “it is not sufficiently comprehensive” in that it “the belief system does not derive[] from a power or being or faith to which all else is subordinate or upon which all else depends” and (3) “though not determinative, no formal or external signs of a religion are present,” such as “teachers or leaders; services or ceremonies; structure or organization; orders of workshop or articles of faith; or holidays.”20 By contrast, federal courts

have permitted lawsuits based on an employer’s failure to accommodate veganism because an

individual could practice veganism “with a sincerity equaling that of traditional religious

views.”21

The Duty to Accommodate Religious Exercise

An employer must reasonably accommodate an employee’s religious beliefs unless the

19 Friedman, 102 Cal.App.4th at 69. 20 Friedman, 102 Cal.App.4th at 70. 21 Chenzira v. Cincinnati Children’s Hospital Medical Center (S.D. Ohio December 7, 2012, 1:11-CV- 00917) __ F.Supp.2d __ (2012 WL 6721098) at 4; 29 C.F.R. 1605.1.

228

accommodation would impose an undue hardship on the employer.22 A reasonable accommodation generally eliminates the conflict between an employee’s religious belief and the job requirement, although some circuits have held that a reasonable accommodation need not eliminate all possible conflicts and the employee may have to compromise a religious practice or accept a less desirable job.23

When Religious Accommodations Impose an Undue Hardship

Under Title VII, an undue hardship exists where accommodating the employee’s

religious beliefs imposes more than a de minimis cost on the employer, either in the sense of

economic costs such as the loss of efficiency or higher wages or non-economic costs such as the

violation of a neutral seniority system.24 These costs must be actual and not hypothetical or speculative.25

An employer also has no obligation under Title VII to implement an accommodation that

would cause the employer to violate any statute prohibiting discrimination or would impact the

22 42 U.S.C. § 2000(e)(j); Gov. Code, § 12940, subd. (l)(1). 23 Equal Employment Opportunity Com. v. Firestone Fibers & Textiles Co., 515 F.3d 307, 313 (total accommodation not required); Sturgil v. United Parcel Service, Inc. (8th Cir. 2008) 512 F.3d 1024, 1033 (court upheld termination of UPS driver who refused to deliver packages after sundown on Sabbath on religious grounds.). 24 Cloutier v. Costco Wholesale Corp. (1st Cir. 2004) 390 F.3d 126, 134. 25 Equal Employment Opportunity Com. v. Red Robin Gourmet Burgers, Inc. (Aug. 29, 2005, C04- 1291JLR) __ F.Supp.2d __ (2005 WL 2090677) at 4-5.

229

rights of other employees in a significant and discriminatory way.26 Thus, while an employer

may have a duty to reorganize employees’ shifts or implement split shifts in order to

accommodate an employee’s religious beliefs, an employer has no obligation to implement shift

changes that would impose undesirable shifts on other employees of different religions, thus resulting in a discriminatory impact on the rights of other employees.27

Unlike Title VII, FEHA does not utilize a di minimis standard to determine when an undue hardship exists. Rather, in 2013, California promulgated amendments to FEHA which clarified that FEHA imposes a heightened undue hardship standard, requiring an employer to provide an accommodation unless it imposes a “significant difficulty or expense” in light of:

“(1) the nature and cost of the accommodation needed; (2) the overall financial resources of the facilities involved in the provision of the reasonable accommodations, the number of persons employed at the facility, and the effect on expenses and resources or the impact otherwise of these accommodations upon the operation of the facility; (3) the overall financial resources of the

covered entity, the overall size of the business of a covered entity with respect to the number of

employees, and the number, type, and location of its facilities; (4) the type of operations,

including the composition, structure, and functions of the workforce of the entity; (5) the

geographic separateness, administrative, or fiscal relationship of the facility or facilities.”28

These amendments also clarified that FEHA prohibits accommodations which segregate an individual from the public or other employees.29

26 Gov. Code, § 12940, subd. (l)(3); Trans World Airlines, Inc. v. Hardison (1977) 432 U.S. 63, 80-84. 27 Trans World Airlines, Inc., 432 U.S.at 80-84. 28 Gov. Code, § 12926, subd. (u). 29 Gov. Code, § 12940, subd. (l)(2).

230

Importantly, an employer cannot establish an undue hardship simply because a client

expresses displeasure for an employee’s religion and/or religious practices.30 An employer must

still articulate a legitimate, neutral, and non-discriminatory reason for the lack of

accommodation.31

IV.

Regulating Appearance in a Law Office in Light of the Prohibition on Religious

Discrimination and the Duty to Accommodate Religious Practices

Law offices often strive to promote a professional image by regulating the appearance of

its attorneys with dress codes that mandate business attire and a clean, professional appearance.

A law office’s dress code may impinge upon an attorney’s religious practices if it has the effect

of prohibiting the attorney from donning religious garb, displaying religious symbols, or

observing religious grooming practices at the workplace. Yet, law offices also have a legitimate

interest in presenting a professional appearance to clients, and Title VII does not require a law

office to exempt an attorney from a dress code in order to accommodate the attorney’s religious

beliefs if the exemption would compromise the professional appearance the law office strives to

present.32 So long as the dress code is neutrally applied and not directed at religious practices, a

law office may be able to enforce the dress code even when it conflicts with an attorney’s religious practices, although careful consideration should be given on a case by case basis to

30 Equal Employment Opportunity Com. Compliance Manual (July 22, 2008) 2008 WL 3862095, §12- II(B); see also Kern v. Dynaletron Corp. (1983) 577 F.Supp. 1196, 1201; Fernandez v. Wynn Oil Co. (9th Cir. 1981) 653 F.2d 1273, 1276-1277. 31 Equal Employment Opportunity Com. Compliance Manual (July 22, 2008) 2008 WL 3862095, §12- II(B) & (D); see also Kern, 577 F.Supp. at 1201 Fernandez, 653 F.2d at 1276-1277. 32 Cloutier v. Costco Wholesale Corp. (1st Cir. 2004) 390 F.3d 126, 136.

231

whether a duty to accommodate exists.33

In Brown v. F.L. Roberts, an employee who refused cut his hair because of his

Rastafarian religion sued his employer under Title VII when the employer transferred him to a position with the same rate of pay but with no customer contact.34 The court rejected the employee’s claim of religious discrimination because exempting the employee from the grooming requirements would undermine its neutral public image policy.35 The court also

found that the employee’s transfer to a lateral position without public contact was a reasonable

accommodation under Title VII.36

Since almost 50% of Americans between 21 and 32 have at least one tattoo or a non-ear

piercing, and since some of these are religious in nature, it is also worthwhile examining cases

that have dealt with the issue of employer regulation of body art.

In Cloutier v. Costco, Cloutier wore facial piercings to work in violation of Costco’s

dress code. 37 After informing Costco that she belonged to the Church of Body Modification and

that her piercings were a religious practice, Costco proposed two accommodations -- wear

undetectable plastic retainers in lieu of the metal jewelry or cover the jewelry with a band-aid.38

Cloutier rejected the accommodations proposed by Costco, maintaining that her religion precluded her from removing or covering her piercings and demanded total exemption from the

33 Hussein v. The Waldorf-Astoria (SD.N.Y. 2001) 134 F.Supp.2d 519, 599; Cloutier, 390 F.3d at 136. 34 Brown v. F.L. Roberts & Co. (D.Mass. 2006) 419 F.Supp.2d 7, 10-11. 35 Brown, 419 F.Supp.2d at 16-17. 36 Brown, 419 F.Supp.2d at 14-15. 37 Cloutier, 390 F.3d at 129-130. 38 Id. at pp. 129-130.

232

policy.39 The court upheld Costco’s termination of Cloutier for violation of the dress code,

finding that the accommodation she demanded worked an undue hardship on Costco by

detracting from Costco’s professional public image.40

By contrast, in Equal Employment Opportunity Commission v. Red Robin, a server named Rangel had two small religious tattoos on his wrist that he received “during a religious ceremony after undergoing a rite of passage involving communal prayer, meditation, and ritual.”41 The tattoos represented Rangel’s servitude to the Egyptian god of the sun, and his commitment to his faith.42 Red Robin allowed Rangel to work for six months without covering his tattoos before demanding that he cover the tattoos to comply with the Red Robin’s dress code.43 Rangel’s religious beliefs dictated that intentionally covering the tattoos was a sin so,

when Rangel refused, Red Robin terminated his employment.44 The court rejected as speculative

Red Robin’s claim that permitting Rangel to work without covering his tattoos created an undue hardship.45 Not only did Rangel work six months without any customer complaints or

measurable adverse impact on Red Robin’s business, Red Robin failed to present any evidence

that “visible tattoos are inconsistent with [Red Robin’s family-oriented and kid-friendly image]

generally or that or that its customers specially shared this perception.”46

All three cases discussed above involved the application of the undue hardship analysis

39 Id. at pp. 129-130. 40 Id. at pp. 135. 41 Equal Employment Opportunity Com. v. Red Robin Gourmet Burgers, Inc. (Aug. 29, 2005, No. C04- 129JLR) __F.Supp.2d __ (2005 WL 2090677) at 1. 42 Id. at 1. 43 Id. at 1. 44 Id. at 1. 45 Id. at 4-5. 46 Id. at 4-5.

233

under Title VII’s di minimis standard. Accordingly, these cases probably do not provide

persuasive authority for a law office’s duty to accommodate religious tattoos and piercings under

FEHA. Indeed, no California case has yet to determine when an exception to a neutrally-applied

dress code or grooming policy imposes “significant difficulty or expense” on an employer pursuant to California’s newly adopted statutory framework, described above.

The Display of Religious Symbols or Religious Speech in a Law Office

A law office may also have a duty to accommodate an employee’s religious speech, including proselytization, or an employee’s display of religious materials at work if permitting such conduct does not work an undue hardship on the law practice.47 However, if an employee’s

religious expression is disruptive or demeaning, discriminating, or harassing towards other

employees, the law practice not only can but should refuse to accommodate the practice.48 Thus, in Peterson v. Hewlett-Packard, Co., the court upheld the termination of an employee who refused to take down the Biblical scriptures he posted in his workspace which were admittedly intended to hurt and offend his homosexual co-workers.49 The court confirmed that an employer

has no duty to accommodate demeaning and harassing conduct even when predicated upon

religious beliefs. 50

47 Equal Employment Opportunity Com. Compliance Manual (July 22, 2008) §§ 12-I and 12-IV. 48 Gov. Code, § 12940, subd. (l)(3); Peterson v. Hewlett-Packard Co. (2004) 358 F.3d 599, 607-608; Trans World Airlines, Inc., 432 U.S. at 80-84; Equal Employment Opportunity Com. Compliance Manual (July 22, 2008), 2008 WL 3862095 §§ 12-I and 12-IV. 49 Peterson, 358 F.3d at 602. 50 Id. at 607-608.

234

When regulating employee speech, law offices within state, city or county government

agencies must also consider an employee’s rights under the First Amendment Free Speech and

Free Exercise clauses as well as its duties under the First Amendment’s Establishment Clause.51

These constitutional authorities do not require complete sanitization of religious speech from the workplace, nor do they compel or permit unbridled religious expression in the workplace.52

Rather, an employer’s duty or ability to regulate religious expression, and the degree to which such regulation must or can occur, requires a balancing of the employee’s free speech rights against the government’s interest justifying regulation of that expression.53 If the balance of

interests weighs in favor of curtailing an employee’s free speech due to the government

employer’s interest in efficiency in the workplace, avoiding disruption, or protecting the legal

rights of other employee’s, then the government can regulate the speech.54 Indeed, if permitting the speech would run afoul of the Establishment Clause by conveying a misperception that the government is endorsing a particular religion, the law practice may have a duty to prohibit the religious expression.55 Moreover, if an employee’s religious expression would cause the employer to violate the Establishment Clause, then neither Title VII nor FEHA compels the employer to accommodate that expression in violation of the Establishment Clause.

For example, in Barry v. Department of Social Services, the state, professing an interest in avoiding an Establishment Clause violation, banned Barry, a welfare worker who had regular contact with the public, from discussing religion and praying with the Department’s clients as

51 Berry v. Dept. of Social Services (2006) 447 F.3d 642, 650; Tucker v. State of Cal. Dept. of Education (1996) 97 F.3d 1204, 1210-1213. 52 Berry, 447 F.3d at 648-652; Tucker, 97 F.3d at 1210-1213. 53 Berry, 447 F.3d at 649-652; Tucker, 97 F.3d at 1210-1216. 54 Berry, 447 F.3d at 649-652; Tucker, 97 F.3d at 1210-1216. 55 Berry, 447 F.3d at 650-652.

235

well as from displaying a Bible and sign which stated “Happy Birthday Jesus” in his cubicle.56

The ban only applied to religious discussions with the Department’s clients and religious displays in his cubicle, which was open to the public. The court upheld this regulation as reasonable because Barry’s conduct created a real risk of entangling the Department in religion or conveying the Department’s endorsement of a particular religion to the public.57

By contrast, in Tucker v. State of California Department of Education, Tucker’s

employer issued a total ban on written or oral advocacy as well as on the display of any religious

materials outside Tucker’s cubicles.58 The state asserted several different interests for its

regulation, including: (1) efficiency, (2) protecting the liberty interests of other employees (3)

meeting the expectations of the taxpayers that their tax dollars not be used to promote religion

and (4) complying with the Establishment Clause.59 The Court rejected the first three interests

because the state failed to adduce any evidence that Tucker’s religious advocacy actually

impacted those interests.60

The Court also found the state’s interest in avoiding violation of the Establishment clause

unpersuasive.61 As to the religious advocacy ban, the Court held that what Tucker discussed in

his cubical or in the hallway with other employees would not appear to any reasonable person to

56 Berry, 447 F.3d at 645-647. 56 Id. at pp. 645-647. 57 Id. at pp. 650-652. 58 Tucker, 97 F.3d at 1208-1209. 59 Id. at p. 1211. 60 Id. at p. 1211-1212. 61 Id. at pp. 1212-1213.

236

represent the views of the state.62 Moreover, since Tucker had no contact with the public, his

proselytizing could not possibly convey an endorsement to the public.63 As to the display of

religious materials outside Tucker’s cubicle, the Court recognized that the state had a greater

interest in regulating the materials posted on state walls because there is a greater likelihood that

materials posted on state walls would be interpreted as endorsement of the views contained in the

those materials.64 Nonetheless, the Court concluded that, because the ban only applied to

religious postings and not secular postings, it was not reasonable to allow employees to post

materials around the office on any secular subject, no matter how controversial, and only forbid

the posting of religious materials, even when the materials were non-controversial informational

announcements that did not proselytize.65 Moreover, because the area outside Tucker’s cubicle

was not open to the public, the court reasoned there was no risk that the public would perceive

religious postings as government endorsement of that religion.66 The Court further reasoned that, even if the area was open to the public, a sweeping ban on religious postings would be

unreasonable because reasonable persons are not likely to consider all of the information posted

on bulletin boards or walls in government buildings to be government-endorsed.67

While the propriety of an employer’s regulation of religious expression necessitates a

case-by-case review of the specific circumstances surrounding the religious expression,68 a few general principles can be gleaned from the case law which has tackled these issues:

62 Id. at pp. 1212-1213. 63 Id. at pp. 1212-1213. 64 Id. at p. 1214. 65 Id. at p. 1215. 66 Id. at p. 1215. 67 Id. at p. 1215. 68 Id. at p. 1209.

237

1. An employer likely may not prohibit an employee from engaging in religious

expression when the expression is not viewed or heard by others, or members of the

public, and does not interfere with workplace efficiency.69

2. A government employer must restrict religious speech that creates impression that the

employer is endorsing or making a particular statement that favors or disfavors

religion.70

3. An employer should have solid evidence of interference with workplace efficiency if

it decides to regulate employees’ religious practices that are not communicated to the

public.71

4. An employer has a greater interest in controlling what materials are posted on its

property than it does in controlling the speech of its employees because there is a

greater likelihood that materials posted on the walls or the corridors of government

offices would be interpreted as representing the views of the government. 72

VI.

The Prohibition on Religious Bias in Providing Client Services

The Unruh Civil Rights Act provides that all persons in California are “free and equal” no matter what their religion and specifically confers upon persons of all religions a right to “full and equal accommodations, advantages, facilities, privileges, or services in all business

69 Tucker, 97 F.3d at 1213-1216; Berry, 447 F.3d at 649-652. 70 Berry, 447 F.3d at 650-652. 71 Tucker, 97 F.3d at 1211-1212. 72 Tucker, 97 F.3d at 1215.

238

establishes of every kind whatsoever.”73 Law offices, therefore, cannot refuse legal representation to potential or existing clients based upon their perceived religion and doing so

could subject the law office to civil rights litigation and liability for damages. The denial of a law

office’s services must be based upon a reasonable interest not directed at a client’s religion

which bears a rational relation to the commercial objectives of the law practice, such as

maintaining order, complying with ethical and legal requirements, or protecting a business

reputation or investment.74

VII.

Strategies for Eliminating Religious Bias in Law Offices

Bias can be more subtle than unlawful discrimination or harassment and frequently may not rise to the level of legally actionable conduct. Rather, bias involves subtle actions and attitudes borne out of stereotypes and revealed in the way an individual deals with persons who

belong to a protected class. This can make bias hard to detect and eliminate.

Education and training aimed at developing a greater awareness of and sensitivity to

religious differences are key to eliminating religious bias within a law practice. Indeed,

California mandates that employers with more than 50 employees provide at least two hours of

interactive harassment training to supervisors within six months of being appointed to a

supervisory position, and at least every two years thereafter.75 Beyond this mandated supervisor

73 Civ. Code, § 51. 74 Harris v. Capital Growth Investors XIV (1991) 52 Cal.3d 1142, 1162-63 (collecting cases where a legitimate business interest justifying the denial of business services was found). 75 Gov. Code, § 12950.1.

239

training, though, law offices should take steps to ensure all employees and associates are sensitive to religious bias and understand that the practice’s culture does not tolerate bias or discriminatory conduct of any kind.

Creating a diverse and inclusive work environment is also an essential component of preventing religious bias in a law practice. The greater number of protected classes represented in a workplace, the greater the perception of fairness is among employees. An environment in which individuals are unencumbered by traditional barriers and stereotypes will enrich a law practice and enable it to fully utilize the perspectives and talents of all employees. Conversely, lack of diversity and sensitivity to differences breeds a restrictive environment where ideas and solutions go unexpressed, morale suffers, disgruntled feelings flourish, productivity diminishes, and turnover is high.

Law offices should also establish and regularly update harassment and discrimination policies at least every one to two years and ensure these policies protect religious expression to the same extent they protect other classes such as race and gender. A law practice should adopt a comprehensive complaint procedure as part of this policy and ensure it provides a meaningful mechanism through which employees may report religious bias or discrimination without fear of retaliation. Moreover, proactively assessing the success of its harassment and discrimination policies will allow the law office to maximize efficiency and quickly identify problems. Law offices can do this by anonymously collecting information regarding the experiences of protected groups within the practice and conducting exit interviews, preferably with a third party, to learn if bias was a factor in the decision to leave.

240

IX.

CONCLUSION

Working to eliminate bias in a law practice is a fluid and evolving process, but remaining mindful of the legal prohibitions against religious bias and proactively adopting strategies designed to eliminate such conduct will help a law office comply with its professional duty to prevent religious bias in its practice.

241

This page left intentionally blank.

242

Legislative Update

Friday, September 5, 2014 General Session; 8:00 – 10:00 a.m.

Patrick Whitnell, General Counsel, League of California Cities

243 Notes:______

244

Due to circumstances beyond our control, this paper must be obtained individually by visiting www.cacities.org/cle.

245 Notes:______

246

Municipal Tort and Civil Rights Litigation Update

Friday, September 5, 2014 General Session; 8:00 – 10:00 a.m.

Eugene P. Gordon, Office of the City Attorney, San Diego

247 Notes:______

248 League of California Cities City Attorneys’ Department Annual Conference September 2014

MUNICIPAL TORT AND CIVIL RIGHTS LITIGATION UPDATE

Eugene P. Gordon Office of City Attorney 1200 Third Avenue, Ste. 1100 San Diego, CA 92101 Phone: (619) 533-5821 Fax: (619) 533-5856 [email protected]

249 MUNICIPAL TORT AND CIVIL RIGHTS LITIGATION UPDATE

TABLE OF CONTENTS

PAGE

1. Plumhoff v. Rickard, 134 S. Ct. 2012 (2014). POLICE OFFICERS WHO SHOT AND KILLED THE DRIVER OF A FLEEING VEHICLE TO END A DANGEROUS VEHICLE PURSUIT DID NOT VIOLATE THE FOURTH AMENDMENT ...... 1

2. Sandoval v. Las Vegas Metropolitan Police Department, No. 12-15654, 2014 WL 2936254 (9th Cir. July 1, 2014). POLICE OFFICERS WERE NOT ENTITLED TO QUALIFIED IMMUNITY UNDER SECTION 1983 FOR ALLEGEDLY ENTERING A HOME WITHOUT A WARRANT AND WITHOUT ASKING BASIC IDENTIFYING QUESTIONS BEFORE DETAINING A TEENAGER WHO LIVED THERE FOR BURGLARY ...... 4

3. Green v. City and County of San Francisco, 751 F.3d 1039 (9th Cir. 2014). THE POINTING OF WEAPONS DURING AN INVESTIGATORY STOP (“FELONY HOT STOP”) OF A SUSPECTED STOLEN VEHICLE COULD CONSTITUTE EXCESSIVE FORCE ...... 8

4. Flores v. County of Los Angeles, No. 12-56623, 2014 WL 3397219 (9th Cir. July 14, 2014). A WOMAN WHO WAS ALLEGEDLY ASSAULTED BY A DEPUTY SHERIFF FAILED TO ESTABLISH THAT THE SHERIFF AND COUNTY WERE DELIBERATELY INDIFFERENT TO THE RISK OF SEXUAL ASSAULT BY DEPUTIES ...... 12

5. Chaudhry v. City of Los Angeles, 751 F.3d 1096 (9th Cir. 2014). PAIN AND SUFFERING DAMAGES ARE RECOVERABLE IN § 1983 SURVIVAL ACTIONS DESPITE CALIFORNIA’S DISALLOWANCE OF SUCH DAMAGES ...... 14

250 6. Heskel v. City of San Diego, 227 Cal. App. 4th 313 (2014). A CITY WAS NOT LIABLE FOR INJURIES TO A PEDESTRIAN WHO TRIPPED OVER A PROTRUDING BASE OF A METAL POST ON A SIDEWALK, EVEN THOUGH THE CONDITION EXISTED FOR MORE THAN A YEAR ...... 16

7. Settle v. State of California, B249236, 2014 WL 3615482 (Cal. Ct. App. July 23, 2014). CODE OF CIVIL PROCEDURE SECTION 1038 WHICH AUTHORIZES AN AWARD OF DEFENSE COSTS FOR FRIVOLOUS TORT ACTIONS BROUGHT AGAINST PUBLIC ENTITIES DOES NOT AUTHORIZE THE IMPOSITION OF DEFENSE COSTS AGAINST PLAINTIFF’S COUNSEL ...... 19

8. Gong v. City of Rosemead, 226 Cal. App. 4th 363 (2014). THE CLAIMS PRESENTATION REQUIREMENTS APPLY TO SUITS ALLEGING INTENTIONAL TORTIOUS CONDUCT BROUGHT AGAINST ELECTED OFFICIALS AND THE PUBLIC ENTITY PURSUANT TO GOVERNMENT CODE SECTION 815.3...... 20

251 POLICE OFFICERS WHO SHOT AND KILLED THE DRIVER OF A FLEEING VEHICLE TO END A DANGEROUS VEHICLE PURSUIT DID NOT VIOLATE THE FOURTH AMENDMENT 1. Plumhoff v. Rickard, 134 S. Ct. 2012 (2014). BRIEF SUMMARY Donald Rickard led police officers on a high-speed car pursuit that came to a temporary halt when Rickard spun out in a parking lot. However, he resumed maneuvering his vehicle even though his bumper was flush against a patrol car. At that point, an officer fired three shots into Rickard’s car, but Rickard managed to drive away, almost hitting an officer in the process. Officers fired 12 more shots as Rickard sped away, striking him and his passenger, both of whom died. Rickard’s minor daughter filed a § 1983 action alleging that the officers used excessive force in violation of the Fourth and Fourteenth Amendments. FACTUAL BACKGROUND Near midnight on July 18, 2004, Lt. Joseph Forthman of the West Memphis, Arkansas, Police Department pulled over a vehicle because it had only one functioning headlight. Donald Rickard was the driver of the vehicle, and Kelly Allen was in the passenger seat. Lt. Forthman noticed an indentation “roughly the size of a head or a basketball” in the windshield of the car. Lt. Forthman asked Rickard if he had been drinking, and Rickard responded that he had not. Because Rickard failed to produce his driver’s license upon request and appeared nervous, Forthman asked him to step out of the car. Rather than comply with Forthman’s request, Rickard sped away. Lt. Forthman gave chase and was soon joined by five other police cruisers. The officers pursued Rickard east on Interstate 40 toward Memphis, Tennessee. While on I-40, they attempted to stop Rickard using a “rolling roadblock,” but they were unsuccessful. The vehicles were described as “swerving through traffic at high speeds.” The parties did not dispute that the vehicles attained speeds over 100-miles-per-hour and that the pursuit lasted over five minutes. During the chase, Rickard and the officers passed more than two dozen vehicles, several of which were forced to take evasive action. Rickard eventually exited I-40 in Memphis, and shortly afterward he made “a quick right turn,” causing a collision with one of the police vehicles. The collision caused Rickard’s car to spin around in a parking lot and collide with another police cruiser. The chase came momentarily to a near standstill at that point, but that did not end the chase. Less than three seconds later, and in danger of being cornered, Rickard threw his car into reverse and maneuvered it “in an attempt to escape.” Rickard’s tires started spinning and his car “was rocking back and forth,” indicating that Rickard was pushing down on the accelerator even though his front bumper was flush with that of one of the police cruisers. The two officers whose cruisers were struck by Rickard’s vehicle got out of their cruisers

252 and approached Rickard’s vehicle. One of the officers tried to get into the vehicle by pounding on the passenger-side window with his gun in his hand. At that point, Rickard’s car collided with a third police cruiser. An officer then fired three shots into Rickard’s car. Rickard “reversed in a 180 degree arc” and “maneuvered onto” another street, forcing an officer to step to his right to avoid the vehicle. As Rickard continued “fleeing down” that street, two other officers fired 12 shots toward Rickard’s car, bringing the total number of shots collectively fired by the three officers during the incident to 15. All the shots were fired during a ten-second span. Even after the shots were fired, Rickard managed to drive away despite the efforts of the police to block his path. Rickard then lost control of his car and crashed into a building. Rickard and Allen both died from some combination of gunshot wounds and injuries suffered in the crash that ended the chase. PROCEDURAL BACKGROUND Plaintiff, Rickard’s surviving daughter, filed an action under § 1983 in federal district court against the six individual police officers involved in the pursuit, and the mayor and chief of police of West Memphis. She alleged that the officers used excessive force in violation of the Fourth and Fourteenth Amendments. The officers moved for summary judgment based on qualified immunity, but the district court denied the motion, holding that the officers’ conduct violated the Fourth Amendment and was contrary to law that was clearly established at the time in question. The Court of Appeals for the Sixth Circuit affirmed the district court’s order denying summary judgment to the officers. The officers filed a timely petition for writ of certiorari to the United States Supreme Court, which was granted by the Court. UNITED STATE SUPREME COURT DECISION The U.S. Supreme Court unanimously held that the officers’ use of deadly force to terminate a dangerous car chase did not violate the Fourth Amendment. In the alternative, the Court held that the officers were entitled to qualified immunity for their conduct at issue because they did not violate any clearly established law at the time of the events in question. In making its ruling, the Supreme Court reversed the decision of the Court of Appeals, which had affirmed the district court’s decision denying the officers’ motion for summary judgment. The Court concluded that “it was beyond serious dispute that Rickard’s flight posed a grave public safety risk,” and that “the police acted reasonably in using deadly force to end that risk.” I. Fourth Amendment A. Use of Deadly Force to Terminate the Pursuit Plaintiff contended that the Fourth Amendment did not allow the officers to use deadly force to terminate the high-speed chase. The Court disagreed, and concluded that, as a matter of law, the officers’ conduct did not violate the Fourth Amendment.

253 All claims that law enforcement officers used excessive force to effect a seizure are governed by the Fourth Amendment’s “reasonableness” standard. See Graham v. Connor, 490 U.S. 386 (1989). The facts in this case are similar to the facts in Scott v. Harris, 550 U.S. 372 (2007), where the Supreme Court held that a “police officer’s attempt to terminate a dangerous high-speed car chase that threatens the lives of innocent bystanders does not violate the Fourth Amendment, even when it places the fleeing motorist at risk of serious injury or death.” Id. at 386. The Court could find no basis for reaching a different conclusion in the instant case. According to the Court, “Rickard’s outrageously reckless driving posed a grave public safety risk.” Although the chase temporarily came to a brief halt when Rickard’s vehicle collided with a police cruiser, the chase did not end at that point. Rather, Rickard immediately resumed maneuvering his car in an attempt to escape. According to the Court, under the circumstances at the moment when the shots were fired, “all that a reasonable officer could have concluded was that Rickard was intent on resuming his flight and that, if he was allowed to do so, he would once again pose a deadly threat for others on the road.” There was nothing in the record that supported Plaintiff’s claim that the chase was already over when the officers began shooting. Thus, the Court concluded that “as in Scott, the police acted reasonably in using deadly force to end that risk.” B. Number of Shots Fired Plaintiff contended that the “degree of force was excessive,” namely, that even if the use of deadly force was permissible, the officers acted unreasonably in firing a total of 15 shots. The Supreme Court rejected that argument. According to the Court, “[i]t stands to reason that, if police officers are justified in firing at a suspect in order to end a severe threat to public safety, the officers need not stop shooting until the threat has ended.” Here, during the ten-second span when all the shots were fired, Rickard never gave up in his attempt to flee. Even after all the shots had been fired, he managed to drive away and continue driving until he crashed. The Court noted that this would be a different case if the officers had continued shooting Rickard after he had clearly given himself up, or if a shot had clearly incapacitated him and had ended any threat of continued flight. But as the Court said, “that is not what happened.” In arguing that too many shots were fired, Plaintiff relied in part on the presence of Kelly Allen as a passenger in the front seat of the car. However, according to the Court, a passenger’s presence does not bear on whether the officers violated Rickard’s Fourth Amendment rights, which are personal rights [that] may not be vicariously asserted.” Alderman v. United States, 394 U.S. 165, 174 (1969). Thus, here, the question before the Court was whether the officers violated Rickard’s Fourth Amendment’s rights, not Allen’s.

254 C. Qualified Immunity The Court further held that even if the officers’ conduct violated the Fourth Amendment, the officers would still be entitled to summary judgment based on qualified immunity. According to the Court, at the time of the incident in question, no case clearly established the unconstitutionality of using deadly force to end a dangerous high- speed car chase, and for that reason, the officers would be entitled to summary judgment based on qualified immunity. Comment This is a very good case for law enforcement. One of the issues in the case was whether the firing of 15 rounds at the suspect vehicle was excessive, and thus in violation of the Fourth Amendment. Plaintiffs frequently argue in police shooting cases that officers should reevaluate whether a deadly threat has been eliminated after each shot. The courts have generally disagreed with that argument. According to one court, such a requirement would place additional risks on the officers not required by the Constitution. Elliott v. Leavitt, 99 F.3d 640, 643 (4th Cir. 1996). The same court concluded that the firing of multiple shots “does not suggest the officers shot mindlessly as much as it indicates that they sought to ensure the elimination of a deadly threat.” Id. In Wilkinson v. Torres, 610 F.3d 546 (9th Cir. (2010), the Ninth Circuit stated that because “we conclude as a matter of law that deadly force was authorized to protect a fellow officer from harm, it makes no difference in this case whether [Officer] Torres fired seven rounds or eleven.” Here, in rejecting Plaintiff’s argument that the firing of 15 rounds into the fleeing vehicle by the officers to end the threat was not reasonable, the Supreme Court took a realistic view of the grave public safety risks posed by high-speed pursuits. Further, the Court acknowledged that law enforcement officers “are taught to keep shooting” until the threat which prompted the shooting initially has ended. The Court did not express any disagreement with such a practice, thus, unless it is clear that the threat has ended, additional shots may be justified.

POLICE OFFICERS WERE NOT ENTITLED TO QUALIFIED IMMUNITY UNDER SECTION 1983 FOR ALLEGEDLY ENTERING A HOME WITHOUT A WARRANT AND WITHOUT ASKING BASIC IDENTIFYING QUESTIONS BEFORE DETAINING A TEENAGER WHO LIVED THERE FOR BURGLARY 2. Sandoval v. Las Vegas Metropolitan Police Department, No. 12-15654, 2014 WL 2936254 (9th Cir. July 1, 2014). BRIEF SUMMARY This case involves the alleged actions of several Las Vegas police officers, who, while on the lookout for two white males, mistook a teenage boy and his friends,

255 all Hispanic, for intruders in the boy’s own home. The officers allegedly pointed guns at the boys, entered the home without a warrant, handcuffed and detained the boys and others, and shot and killed Hazel, the family dog. The family brought suit against the police, alleging violations of their constitutional rights and related rights under state law. FACTUAL BACKGROUND On October 24, 2009, the Las Vegas Metropolitan Police Department received a 9-1-1 phone call from a witness, Albert Schouten, who said that he saw two white males between ages 18 and 20, one carrying a skateboard, jump a fence and look through the windows of a house in the neighborhood. There had been a recent pattern of youths burglarizing homes in the area. Sgt. Jay Roberts and Officer Michael Dunn and later several additional officers, responded to the call, and arrived at the residence of Jesus Sandoval and his family. The officers entered the yard and saw open windows, doors, and gates, consistent with residential use, but did not see any entry indicators suggesting a burglary. Sgt. Roberts looked through an open bedroom window and saw “three young males” who looked “about 14 or 15” sitting on a bed, listening to music, watching TV, and playing video games. Roberts conceded that the boys -- Henry, who lived at the house, and his two friends -- did not match the description of the boys that the witness Schouten had provided as to the number or age of the suspects. As to race, Roberts agreed that the boys in the house were Hispanic, and were “not the color of a white person that you typically think of as being white.” Sgt. Roberts, without asking the boys any basic identifying questions, allegedly pointed his gun at the head of one of the boys through the bedroom window. Roberts allegedly gave the boys conflicting commands, telling them not to move, show their hands, and turn the music down. Officer Dunn then entered the house through the sliding glass door. He stated that he entered the house because he thought that Roberts “could not control the suspects.” Roberts ordered the boys to exit the bedroom. One of the boys asked to be allowed to put away the family dog, Hazel, a pit bull, before letting the officers enter the home, but Roberts refused to do so. As the boys exited the bedroom, according to the boys’ testimony, Officer Dunn shot Hazel. The boys were handcuffed after they left the house, and at that point the officers made their first inquiries as to the boys’ right to be in the house. Jesus Sandoval, the father of one of the boys and the owner of the house, arrived at the scene. According to him, he was handcuffed and mistreated by the officers. He was placed in a patrol car for 25 to 30 minutes where he screamed in pain due to recent back surgery. Hazel was transported from the scene by Animal Control officers and soon afterwards died. None of the individuals involved in the incident were cited or charged with any crime. Officer Dunn testified that the boys committed no crime and admitted that

256 if he or Sgt. Roberts had asked basic identifying questions, the entire incident would not have happened. PROCEDURAL BACKGROUND The Sandovals brought suit under § 1983 against the police department and several officers, including Roberts and Dunn. The complaint alleged essentially excessive force and false arrest in violation of the Fourth Amendment and state law. The district court granted summary judgment in favor of the police department and its officers on all claims, primarily on the basis of qualified immunity under federal law. Plaintiffs filed a timely notice of appeal. NINTH CIRCUIT DECISION The Ninth Circuit reversed the judgment of the district court on the Fourth Amendment claims for excessive force and unlawful entry and on certain of the state law claims, and affirmed the judgment on the remaining claims. Warrantless Entries Into Homes A warrantless entry into a home is unlawful unless the officer has probable cause and either exigent circumstances or an emergency sufficient to justify the entry exist. United States v. Struckman, 603 F.3d 731, 738 (9th Cir. 2010). The Ninth Circuit concluded that Officer Dunn was not entitled to qualified immunity on the Sandovals’ claim that Dunn’s warrantless entry into their home constituted an unreasonable search in violation of the Fourth Amendment. 1. Exigency Exception The exigency exception permits a warrantless entry into a home where officers “have both probable cause to believe that a crime has been or is being committed and a reasonable belief that their entry is necessary to prevent . . . the destruction of relevant evidence, the escape of the suspect, or some other consequence improperly frustrating legitimate law enforcement efforts.” Hopkins v. Bonvicino, 573 F.3d 752, 763 (9th Cir. 2009). Here, according to the court, the officers did not have probable cause for either burglary or the lesser offense of “prowling.” The officers encountered three boys who did not match the informant’s description in race, number, or age. The officers gathered no information to suggest that the boys were on the premises illegally. Neither the physical signs at the scene nor the boys’ behavior was consistent with a burglary in progress. Thus, according to the court, the officers had no basis to conclude that the boys had violated any laws. Since Officer Dunn’s warrantless entry into the home was not supported by probable cause, the entry violated the Sandovals’ Fourth Amendment rights. 2. Emergency Aid Exception The emergency aid exception permits law enforcement officers to “enter a home without a warrant to render emergency assistance to an injured occupant or to

257 protect an occupant from imminent injury.” Brigham City, Utah v. Stuart, 547 U.S. 398, 403 (2006). Following Brigham, the cases suggest that threat to officer safety also falls under the emergency exception. United States v. Snipe, 515 F.3d 947, 952 (9th Cir. 2008). Here, however, according to the court, the emergency aid exception was inapplicable, as the officers did not have an objective reasonable basis for concluding that there was an immediate need to protect themselves or others from serious harm. Fourth Amendment Excessive Force Claims Excessive use of force in effectuating a seizure violates the Fourth Amendment. Graham v. Connor, 490 U.S. 386, 388 (1989). 1. Pointing A Gun The Sandovals claimed that Sgt. Roberts pointed a gun at the head of at least one of the boys. The Ninth Circuit has previously held that police officers used excessive force when they drew a gun and pointed it at the head of an apparently unarmed misdemeanor subject. Robinson v. Solano County, 278 F.3d 1007, 1014 (9th Cir. 2002) (en banc). The Ninth Circuit noted that the fact pattern in Robinson was similar to that here. 2. Handcuffing The Ninth Circuit has held that “handcuffing substantially aggravates the intrusiveness of a detention,” and “the use of handcuffs must be justified by the totality of the circumstances.” Meredith v. Erath, 342 F.3d 1057, 1063 (9th Cir. 2003). Here, according to the court, “the question is whether the officers were on notice that handcuffing, removing from their residence, and detaining compliant persons not suspected of any crime, or alternatively that causing excessive pain while handcuffing or placing someone into a squad car, constituted excessive force.” Here, according to the court, taken in the light most favorable to the Sandovals, the evidence showed that the boys complied with the officers’ commands at all times, that Henry was detained despite the officers’ knowledge that he had committed no crime, and that the officers had come to believe that none of the boys had been in the house illegally. Under those alleged circumstances, the court concluded that the right to be free from the particular force used in this case was clearly established for qualified immunity purposes. Familial Association Fourteenth Amendment Claim The Sandovals claimed that the officers deprived them of their Fourteenth Amendment right to familial relations when they kept Sandoval and his son separated for forty minutes, when they used excessive force, and when they shot their dog, Hazel. However, the court determined that there was no due process violation because the brief separation did not rise to the level of conduct that shocked the conscience. Rosenbaum v. Washoe Cnty, 663 F.3d 1071, 1079 (9th Cir. 2011).

258 The court also held that the shooting of the family dog, “albeit sad and unfortunate, [did] not fall within the ambit of deprivation of a familial relationship.” Note Although the Sandovals did not plead that the shooting of Hazel constituted an unlawful seizure of property in violation of the Fourth Amendment, the Ninth Circuit has recognized that the killing of a dog by police officers is a seizure which can constitute a cognizable claim under § 1983. See San Jose Charter of Hells Angels Motorcycle Club v. City of San Jose, 402 F.3d 962, 975 (9th Cir. 2005). Conclusion The Ninth Circuit reversed the district court’s grant of qualified immunity to the officers on the Sandovals’ excessive force claims. The court also held that Officer Dunn was not entitled to qualified immunity for his entry into the house because, according to the court, it was clearly established law as of 2009 that the warrantless search of a dwelling must be supported by either the exigency or the emergency aid exception.

THE POINTING OF WEAPONS DURING AN INVESTIGATORY STOP (“FELONY HOT STOP”) OF A SUSPECTED STOLEN VEHICLE COULD CONSTITUTE EXCESSIVE FORCE 3. Green v. City and County of San Francisco, 751 F.3d 1039 (9th Cir. 2014). BRIEF SUMMARY Police officers stopped a vehicle mistakenly identified as a stolen vehicle. The officers made a “high-risk” stop during which the driver was held at gunpoint by multiple officers, handcuffed, forced to her knees, and detained for up to twenty minutes. She was released only after the officers eventually discovered their mistake and that her vehicle was not stolen. The driver filed a § 1983 action alleging, among other things, excessive force, in violation of the Fourth Amendment. FACTUAL BACKGROUND The following narration of what occurred has been taken, sometimes verbatim, from the instant Ninth Circuit’s opinion: On the night of March 30, 2009, Plaintiff Denise Green, a 47-year-old African- American, was driving her vehicle, a 1992 burgundy Lexus ES 300 with license plate number 5SOW350, in San Francisco. At approximately 11:15 p.m., Green passed a police cruiser equipped with an Automatic License Plate Reader (“ALPR”) operated by San Francisco Police Officers Esparza and Pedersen. The San Francisco Police Department’s ALPR uses mounted cameras on its police cruisers to capture the license plate numbers of passing vehicles and match the captured numbers against a database of wanted numbers. If the

259 ALPR identifies a potential match, it alerts the officer and displays an image of the plate. It is undisputed that the ALPR occasionally makes false “hits” by misreading license plate numbers and mismatching passing license plate numbers with those listed as wanted in the database. Because of the known flaws in the system, officers are trained that an ALPR hit does not automatically justify a vehicle stop, and officers are directed to verify the validity of the identified hit before executing a stop. When Green drove past the officers’ camera car, the ALPR misread her license plate number and identified her plate as belonging to a stolen vehicle. The officers were unable to read the ALPR photograph as it was blurry and illegible, and they could not get a direct visual of Green’s license plate. Because the officers had a suspect in custody, Officer Esparza radioed the hit to dispatch in case another officer in the vicinity would be able to act on the alert. He described the vehicle as a dark Lexus and read the entire plate number identified by the ALPR (5SOW750), which was not the license plate number on the Lexus. He also asked dispatch to confirm that plate number 5SOW750 was wanted. Dispatch ran plate number 5SOW750 and notified Officer Esparza that it was, in fact, wanted and that it belonged to a gray GMC truck. Esparza did not state on the radio that he had or had not visually confirmed the plate himself. Sergeant Kim, patrolling nearby, observed Green’s vehicle pass him. Based on the radio traffic, and a confirmation that the vehicle Esparza saw was a dark burgundy Lexus, Sgt. Kim decided to make a “high-risk” or “felony” stop. Officers perform “high-risk” stops when they perceive there to be a danger to the police effecting the stop. Such stops typically involve handcuffing the suspect at gunpoint and require the participation of multiple officers. Because Sgt. Kim believed that Green posed a risk, he waited for backup before pulling her over. At no point while he was following or stopped behind Green’s vehicle did Sgt. Kim visually confirm the entirety of Green’s license plate number. He conceded that if he had read the full plate, he would not have had reasonable suspicion to effect the stop. After backup arrived, Sgt. Kim directed Green to pull over, and she immediately complied. At that point, the officers allegedly all drew their weapons and pointed them at Green. It was undisputed that there were at least four officers and, perhaps, as many as six. An officer ordered Green to raise her hands and exit the vehicle and Green complied. As she exited the vehicle, Green observed a police officer pointing a shotgun at her. The officers gave her conflicting orders, and eventually Sgt. Kim took charge of issuing commands. He holstered his gun while the other officers kept their weapons trained on Green, and he directed her to lower to her knees where he proceeded to handcuff her. At the time of the incident, Green was 5’6” and 250 pounds and experienced knee problems, so she faced some difficulty in being lowered to the ground and in standing back up. Sgt. Kim had to help her back to her feet. Green testified that she saw four officers train their weapons on her while she was handcuffed. Officers then searched Green’s vehicle and performed a pat-down search of her person. After the searches uncovered nothing, Sgt. Kim ran a check of Green’s

260 entire license plate number. The check confirmed that the plate belonged to a burgundy Lexus registered to Green that had never been reported as stolen. Green’s handcuffs were then removed, but she was directed to remain until the officers had completed paperwork documenting the stop. Green stated that she was handcuffed for at least ten minutes and that the entire stop lasted 18-20 minutes, while the officers maintained that the stop was much shorter. It was undisputed that Green was compliant and nonresistant for the entirety of the stop and that there was no indication that she was armed. PROCEDURAL BACKGROUND Green brought a § 1983 action in federal district court against the City and County of San Francisco and Sgt. Kim alleging violations of her Fourth Amendment rights on the grounds that the incident constituted an unreasonable search and seizure and a de facto arrest without probable cause. She further alleged that the force used was unreasonable. The district court granted summary judgment in favor of all of the Defendants. Green filed a timely notice of appeal. NINTH CIRCUIT DECISION The Ninth Circuit reversed the district court’s grant of summary judgment in favor of the Defendants. I. Fourth Amendment A. Unlawful Seizure The Ninth Circuit explained that it could not be established as a matter of law whether or not reasonable suspicion existed to justify the investigative detention. Officer Esparza did not visually confirm the plate nor did he state that he had. None of the officers involved made a visual confirmation and no police department policy placed that responsibility on the officers in the camera car or on the officer actually making the stop. Thus, according to the court, there was a triable issue for the jury to determine whether it was reasonable for Sgt. Kim to effect the stop without making an independent visual verification of the license. B. De Facto Arrest Without Probable Cause Green contended that even if reasonable suspicion existed for a valid investigatory detention under Terry v. Ohio, 392 U.S. 1 (1968), the stop eventually rose to the level of an arrest, for which probable cause was lacking. If the stop amounted to an arrest, it would be unlawful in the absence of probable cause. According to the court, “[t]here is no bright-line rule to establish whether an investigatory stop has risen to the level of an arrest. Instead, this difference is ascertained in light of the totality of the circumstances . . . This is a highly fact- specific inquiry that considers the intrusiveness of the methods in light of whether these methods were reasonable given the specific circumstances.” Here, according to the court, the methods used to carry out the stop were “highly intrusive.” Green was held at gunpoint by multiple guns, handcuffed, and taken

261 to the ground. “Under ordinary circumstances, when the police have only reasonable suspicion to make an investigatory stop, drawing weapons and using handcuffs and other restraints will violate the Fourth Amendment.” Washington v. Lambert, 98 F.3d 1181, 1187 (9th Cir. 1996). According to the court, “[t]he question of whether this incident amounted to an unlawful arrest turns on whether it is sufficiently distinguishable from the ‘ordinary circumstances’ to justify such tactics.” The court reiterated that it has “only allowed the use of especially intrusive means of effecting a stop in special circumstances, such as 1) where the suspect is uncooperative or takes action at the scene that raises a reasonable possibility of danger or flight; 2) where the police have information that the suspect is currently armed; 3) where the stop closely follows a violent crime; and 4) where the police have information that a crime that may involve violence is about to occur.” Washington, 98 F.3d at 1189. The number of police officers present is also “highly relevant.” Id. at 1190. The ultimate inquiry is “whether the officers’ conduct was a reasonable response to legitimate safety concerns on the part of the officers.” Id. at 1186. Here, according to the court, none of the factors justifying the highly intrusive tactics were present. The absence of those factors militate against a finding that the officers’ conduct was a reasonable response to safety concerns. Nevertheless, the officers contended that the existence of a stolen vehicle, in and of itself, was enough to justify the force used as a matter of law. The court disagreed, holding that such a determination is for the jury. According to the court, “[t]he fact that Green was stopped on suspicion of possessing a stolen vehicle does not by itself demonstrate that she presented a danger to the officers.” While the crime at issue (stolen vehicle) is arguably severe, there was no indication at the scene that Green posed an immediate threat to the safety of the officers or others. Accordingly, the Ninth Circuit concluded that genuine issues of material fact existed as to (1) whether the police officers had reasonable suspicion to make an investigatory stop of Green’s vehicle; (2) whether the stop of Green’s vehicle exceeded the limits of a Terry investigative detention; and (3) whether Green was subjected to excessive force by the officers in effecting the investigatory stop. Therefore, Green’s claims preclude summary judgment as a matter of law in favor of the Defendants. Comment The Sandoval and Green cases both involved an issue of, among other things, whether the pointing of guns at a suspect constitutes excessive force and/or transforms a lawful Terry v. Ohio investigatory detention into an arrest that requires probable cause. The leading case in the Ninth Circuit on this subject is Washington v. Lambert, 98 F.3d 1181 (9th Cir. 1996), where the court emphasized that the totality of the circumstances determines whether and when an investigatory stop becomes an arrest. Id. at 1185. The court will examine “the intrusiveness of the stop, i.e., the aggressiveness of the police methods and how much the plaintiff’s liberty was restricted.” Id. The court will then examine

262 “the justification for the use of such tactics, i.e., whether the officer had sufficient basis to fear for his safety to warrant the intrusiveness of the action taken.” Id at 1185. This “inquiry is undertaken . . . from the perspective of law enforcement,” while bearing in mind that “the purpose of a Terry stop is to allow the officer to pursue his investigation without fear of violence.” United States v. Guzman- Padilla, 573 F.3d 865, 884 (9th Cir. 2009). The Ninth Circuit has repeatedly explained that “because we consider both the inherent danger of the situation and the intrusiveness of the police action, . . . pointing a weapon at a suspect and handcuffing him, or ordering him to lie on the ground, or placing him in a police car will not automatically convert an investigatory stop into an arrest that requires probable cause.” Lambert, 98 F.3d at 1186. In United States v. Edwards, No. 13-50165, 2014 WL 3747130 (9th Cir. July 31, 2014), the most recent case decided by the Ninth Circuit on the subject, four police officers, during an investigative detention, pointed their weapons at a person who matched the description of a suspect who was shooting at passing cars, forced the suspect to kneel down on the pavement and handcuffed him. The court held that the officers’ aggressive conduct was reasonable and did not convert the detention into an arrest. According to the court, “[t]he officers’ legitimate safety concerns justified their on-the-spot decision to use intrusive measures to stabilize the situation before investigating further.”

A WOMAN WHO WAS ALLEGEDLY ASSAULTED BY A DEPUTY SHERIFF FAILED TO ESTABLISH THAT THE SHERIFF AND COUNTY WERE DELIBERATELY INDIFFERENT TO THE RISK OF SEXUAL ASSAULT BY DEPUTIES 4. Flores v. County of Los Angeles, No.12-56623, 2014 WL 3397219 (9th Cir. July 14, 2014). BRIEF SUMMARY Plaintiff claimed that she was fondled by a deputy sheriff at a vehicle inspection site. She claimed that the assault was a proximate result of the failure of the Sheriff and the County to train its deputy sheriffs to ensure that deputies did not sexually assault women that they came into contact with. However, she failed to show that the Sheriff and the County were deliberately indifferent to the risk of sexual assault by deputies. Plaintiff filed a § 1983 action alleging that the failure to train was a violation of her constitutional rights. FACTUAL BACKGROUND Plaintiff alleged that after she received a traffic ticket, she drove to a County vehicle inspection site to clear the ticket. While at the site, according to her complaint, a deputy sheriff whose identity was unknown touched and fondled Plaintiff’s body without her consent.

263 PROCEDURAL BACKGROUND Plaintiff filed an action under § 1983 in federal district court against the Sheriff and the County. The complaint alleged that Defendants failed to implement proper training to protect woman who come in contact with deputies from being sexually assaulted by deputies. The complaint also alleged that Defendants were on notice, based on the criminal conviction of a different deputy for three sexual assaults seven years earlier, that the training of deputies “had deteriorated, was defective, and needed improvement.” The failure to train was alleged to be a violation of Plaintiff’s constitutional rights. The district court dismissed Plaintiff’s claims for failure to state a claim for relief. Plaintiff filed a timely notice of appeal. NINTH CIRCUIT DECISION The Ninth Circuit affirmed the order of the district court dismissing the action. According to the Ninth Circuit, Plaintiff’s allegations did not establish that the Sheriff or the County “were deliberately indifferent to the risk of sexual assault by deputies on members of the public.” Thus, Plaintiff did not allege facts sufficient to state a claim against the County or the Sheriff, and therefore the district court properly dismissed the action for failure to state a claim. The U.S. Supreme Court has severely limited the circumstances which must exist before a municipality under Monell can be found liable for a failure to train. See City of Canton v. Harris, 489 U.S. 378 (1989). As to a municipality, “the inadequacy of police training may serve as a basis for § 1983 liability only where the failure to train amounts of deliberate indifference to the rights of persons with whom the police come into contact.” Id. at 388. This means that Plaintiff “must demonstrate a ‘conscious’ or ‘deliberate’ choice on the part of a municipality in order to prevail on a failure to train claim.” Price v. Sery, 513 F.3d 962, 973 (9th Cir. 2008). The same standard applies to an official in his individual capacity— Plaintiff must establish that the Sheriff was deliberately indifferent to the need to train deputies, and the lack of training actually caused the deprivation of Plaintiff’s constitutional rights. Connick v. Thompson, 131 S.Ct. 1350, 1358 (2011). Here, according to the court, Plaintiff did not allege a pattern of sexual assaults perpetrated by sheriff’s deputies before her alleged assault. The isolated incidents of criminal wrongdoing by one deputy several years before Plaintiff’s incident does not suffice to put the County or Sheriff on notice that a course of training was deficient in a particular respect. Furthermore, the court explained that absent a longstanding pattern of similar criminal behavior by untrained deputies, there is no basis to conclude that a failure to train deputies not to commit sexual assaults on women with whom the deputies come into contact constitutes deliberate indifference to the risk of such assaults by deputies. The deputies were certainly familiar with the criminal prohibition on sexual assault, “as everyone is presumed to know the law.” United States v. Budd, 144 U.S. 154, 163 (1892). Additionally, according to the court, in light of the law

264 enforcement duties of police officers, there is not a patently obvious need for police agencies “to specifically train officers not to rape young women.” Andrews v. Fowler, 98 F.3d 1069, 1077 (8th Cir. 1996). CONCLUSION The Ninth Circuit held that Plaintiff “failed to allege sufficiently that the failure to train sheriff’s deputies not to commit sexual assault constitutes deliberate indifference to the risk of such assault by a deputy.” Given the absence of any pattern of sexual assaults, and the clear criminality of the conduct, the court also held that written instructions in a policy manual that deputies refrain from sexually assaulting women “cannot plausibly be considered an effective means to prevent sexual assault, when the employees are peace officers sworn to uphold the law which prohibits such assaults.”

PAIN AND SUFFERING DAMAGES ARE RECOVERABLE IN § 1983 SURVIVAL ACTIONS DESPITE CALIFORNIA’S DISALLOWANCE OF SUCH DAMAGES 5. Chaudhry v. City of Los Angeles, 751 F.3d 1096 (9th Cir. 2014). BRIEF SUMMARY The issue in this case is whether, in a survival action brought under § 1983, damages for pre-death pain and suffering are recoverable by decedent’s estate. Under California’s survival statute, a decedent’s estate may not recover for the decedent’s pre-death pain and suffering. FACTUAL BACKGROUND Early in the morning of March 25, 2008, Mohammad Usman Chaudhry (“Usman”) was shot and killed by Los Angeles police officer Joseph Cruz. Usman was a 21-year-old Muslim man who was autistic and often wandered from home. Officer Cruz and his partner, Officer David Romo, saw Usman sleeping in front of an apartment building. Suspecting that Usman might be a drug user, they stopped their police cruiser and approached him. Cruz asked Usman to show his identification. Usman complied. Cruz gave the identification to Romo, who returned to the cruiser to check for outstanding warrants. Cruz testified at trial ·that, while Romo was at the cruiser, Usman lunged at Cruz with a knife. Cruz drew his gun and fired four shots, three of which struck Usman in the chest and abdomen. Usman died at the scene. The Los Angeles County Coroner received Usman’s remains and began a search for next of kin. However, it did not notify his family of his death for twentyone days, and by that time, his body had decayed which prevented the parents from burying their son in accordance with the religious customs of Islam. PROCEDURAL BACKGROUND Usman’s Estate and parents brought numerous claims in federal district court against the City, the Chief of Police, Officers Cruz and Romo, and the

265 County. The district court rejected most of the claims before trial. The only remaining claims were the Estate’s excessive force claim against Cruz, the Estate’s assault and battery claim against the City, and the parents’ wrongful death claim against Cruz and the City. Those claims went to trial. The jury found that Officer Cruz used excessive force and found for the Estate and the parents. The jury awarded $700,000 to the parents for their wrongful death claim under state law, and $1,000,000 to the Estate based on Usman’s pain and suffering from the excessive force claim under §1983. The district court granted Defendants’ motions to dismiss. Among other things, the court granted Defendants’ motion for judgment as a matter of law as to the Estate’s $1,000,000 award for pain and suffering. The court concluded that California law which does not allow recovery for pain and suffering in survival actions should be incorporated into § 1983 actions. Plaintiffs timely appealed most of the district court’s orders granting Defendants’ motions to dismiss. NINTH CIRCUIT DECISION The Ninth Circuit reversed a number of orders of the district court. The most significant decision of the Ninth Circuit in this case was its reversal of the district court’s order striking the Estate’s $1,000,000 damages award for pain and suffering under § 1983. A. The Estate’s Pre-death Pain and Suffering Damages Under § 1983 Under California’s survival statute, Cal. Civ. Proc. Code § 377.20, Usman’s § 1983 claim survived his death. See Smith v. City of Fontana, 818 F.2d 1411, 1416 (9th Cir. 1989).(overruled on unrelated grounds). In survival actions, however, California does not allow a decedent’s estate to recover damages for the decedent’s pre-death pain and suffering. Cal. Civ. Proc. Code § 377.34. Section 377.34 limits damages in survival actions to the victim’s pre-death economic losses. According to the court, since “federal law is silent on the measure of damages in § 1983 actions, California’s disallowance of pre-death pain and suffering damages governs unless it is inconsistent with the policies of § 1983.” The policies underlying § 1983 include compensation to persons injured by deprivation of federal rights and prevention of abuses of power by those acting under color of law. Robertson v. Wegmann, 436 U.S. 584, 589-590 (1978). The district court found that § 377.34 was not inconsistent with § 1983 and thus struck the jury’s $1,000,000 verdict in favor of the Estate. The Ninth Circuit disagreed with the district court. The Ninth Circuit concluded that the severe limitation on damages in § 377.34 is inconsistent with § 1983’s goals of compensation and deterrence. According to the court, “a prohibition against pre-death pain and suffering awards for a decedent’s estate has the perverse effect of making it more economically advantageous for a defendant to kill rather than injure his victim.” Therefore, the court held that the limitation of

266 damages in § 377.34 does not apply to § 1983 claims where the decedent’s death was caused by a violation of federal law. B. The Estate’s California Civil Code § 52.1 Claim The district court dismissed the Estate’s claim against the police officers under California Civil Code § 52.1, which provides a cause of action for violations of a plaintiff’s state or federal civil rights committed by “threats, intimidation, or coercion.” The district court held that § 52.1 requires evidence of discriminatory intent, and thus dismissed the Estate’s § 52.1 claim. However, the California Supreme Court in Venegas v. County of Los Angeles, 32 Cal. 4th 820, 843 (2004), had previously clarified the Bane Act and held that § 52.1 does not require proof of discriminatory intent. Therefore, the Ninth Circuit concluded that the district court’s dismissal of the Estate’s § 52.1 claim was in error. The Ninth Circuit also ruled that the Estate’s § 52.1 claim was not entirely duplicative of its § 1983 claim. The court explained that if the Estate had prevailed on its § 52.1 claim, under California law, it could have received a multiplier of the lodestar of its attorneys’ fees to compensate for the risk of contingent representation. Such a multiplier is not available under § 1983. See City of Burlington v. Dague, 505 U.S. 557, 562-566 (1992). The Ninth Circuit then reversed the district court’s dismissal of the Estate’s § 52.1 claim and remanded with instructions to amend the judgment to reflect the Estate’s success on that claim.

A CITY WAS NOT LIABLE FOR INJURIES TO A PEDESTRIAN WHO TRIPPED OVER A PROTRUDING BASE OF A METAL POST ON A SIDEWALK, EVEN THOUGH THE CONDITION EXISTED FOR MORE THAN A YEAR 6. Heskel v. City of San Diego, 227 Cal. App. 4th 313 (2014). BRIEF SUMMARY Plaintiff claimed that he suffered personal injuries when he tripped over the protruding base of a metal post cemented into a city sidewalk. Plaintiff’s lawsuit against the City alleged that the condition constituted a dangerous condition of public property which had existed for over a year before the accident. FACTUAL BACKGROUND Plaintiff and his son, Danny, went for a walk on the night of September 29, 2009. Plaintiff tripped over a protruding base of a hollow metal post that was cemented into a city sidewalk, injuring his back and fracturing his left wrist. Plaintiff claimed the area was not well lit and that there were not any adequate warnings of the condition. PROCEDURAL BACKGROUND Plaintiff filed a personal injury action against the City alleging that the condition on the sidewalk constituted a dangerous condition of public property. The City

267 filed a motion for summary judgment on the ground that it lacked the requisite actual or constructive notice for it to be liable. The City’s motion was supported with several declarations from City employees which tended to show that City workers had been in the area where Plaintiff fell a few times over the year before the accident, but that they did not notice the condition. The City was not notified by either City workers or citizens about the condition before Plaintiff’s fall. Plaintiff produced three declarations in opposition to the City’s motion. The first, a declaration of an acquaintance of Plaintiff, Natan Dobrovsky, stated that Dobrovsky was familiar with the condition, and that he himself had tripped over it at least a year prior to Plaintiff’s fall. He also stated that a “No Parking” sign had been inserted into the base a few months after Plaintiff’s fall. Plaintiff produced the declaration of his son, Danny, who explained that he saw Plaintiff trip over the condition. A few months after the fall, Danny observed that the area around the condition had been painted and that a “No Parking” sign had been inserted into the opening at the base. Plaintiff’s third declaration was submitted by Heraclio Serrano, a maintenance worker at a nearby apartment complex, who explained that he had regularly worked in the area near the condition and that it had been present “for about two years” before the sign was inserted into it. On one occasion during that two-year period, the condition punctured a tire after he drove his truck onto the sidewalk. Plaintiff also produced pictures of the condition which were very poor in quality, but indicated that the condition was roughly a few inches in height and not readily apparent from the street. The City produced declarations showing that there were no complaints concerning the area where Plaintiff fell within the five years preceding the date of Plaintiff’s fall, and that the police department had not received any reports of automobile accidents, vandalism, or other damage resulting in a downed street sign. The trial court granted the City’s motion for summary judgment, finding, as a matter of law, the City did not have constructive notice of an obvious dangerous condition. Plaintiff filed a timely notice of appeal. CALIFORNIA COURT OF APPEAL DECISION The Court of Appeal affirmed summary judgment in favor of the City. The court concluded that because Plaintiff failed to present any evidence that the condition was obvious such that the City, in the exercise of due care, should have become aware of it, his claim must fail as a matter of law. Plaintiff did not contend that the City had actual notice of the condition so the primary issue in this case is whether the City had “constructive notice” of the condition within the meaning of Government Code section 835.2, subdivision (b). Constructive Notice Section 835 provides that a public entity is liable for injury caused by a dangerous condition of its property if the plaintiff establishes: (1) the property was

268 in a dangerous condition at the time of the injury; (2) the plaintiff’s injury was proximately caused by the dangerous condition; (3) the dangerous condition created a reasonably foreseeable risk of the kind of injury the plaintiff incurred; and (4) that either: (a) a negligent or wrongful act of an employee of the public entity created the dangerous condition; or (b) the public entity had actual or constructive notice of the dangerous condition under section 835.2 for a sufficient time prior to the injury to have taken measures to protect against it. “Constructive notice,” under section 835.2, subdivision (b) requires a plaintiff to establish that the dangerous condition “had existed for such a period of time and was of such an obvious nature that the public entity, in the exercise of due care, should have discovered the condition and its dangerous character.” Admissible evidence for establishing constructive notice is defined by statute as including whether a reasonably adequate inspection system would have informed the public entity, and whether it maintained and operated such an inspection system with due care and did not discover the condition. Cal. Gov’t Code § 835.2 (b)(1)-(2). “Whether the dangerous condition was obvious and whether it existed for a sufficient period of time are threshold elements to establish a claim of constructive notice.” State v. Superior Court of San Mateo County, 263 Cal. App. 2d 396, 400 (1968). Here, Plaintiff contended that a reasonable jury could find that the City had constructive notice of the condition because it was present in its dangerous state for more than a year. The court did not agree. According to the court, the declarations produced by the City established that it did not have constructive notice of the condition. They only showed that City workers had been in the area and did not see the condition for at least a year prior to Plaintiff’s accident. “[T]his creates a reasonable inference that the condition was not obvious.” According to the court, Plaintiff merely supplied evidence that the condition existed for more than one year. “While his evidence suggests that the condition was above ground and visible, it does not demonstrate that it was of a substantial size or so visible from the public thoroughfares that the City, in the exercise of due care, should have become aware of it and taken corrective action to cure it.” Since Plaintiff failed to show that the existing evidence created a reasonable inference that the condition was obvious and failed to produce additional evidence proving that element, the Court of Appeal held that the trial court’s grant of the City’s motion for summary judgment was proper.

269 CODE OF CIVIL PROCEDURE SECTION 1038 WHICH AUTHORIZES AN AWARD OF DEFENSE COSTS FOR FRIVOLOUS TORT ACTIONS BROUGHT AGAINST PUBLIC ENTITIES DOES NOT AUTHORIZE THE IMPOSITION OF DEFENSE COSTS ON PLAINTIFF’S COUNSEL 7. Settle v. State of California, B249236, 2014 WL 3615482 (Cal. Ct. App. July 23, 2014). BRIEF SUMMARY Code of Civil Procedure section 1038 requires a mandatory award of defense costs where the trial court grants summary judgment and finds that plaintiff lacked reasonable cause and good faith in filing or maintaining a tort action against a public entity. The issue in this case is whether section 1038 authorizes an award of defense costs against plaintiff’s counsel as well as against plaintiff. FACTUAL BACKGROUND Plaintiff sued the State of California (State) and the City of Morro Bay (City) for a dangerous condition of public property after a sand escarpment on the beach collapsed, causing her to fall into the water and rocks. The State did not own, control, or maintain the beach. During discovery, the City admitted that it owned and maintained the property. The State advised Plaintiff’s attorney that it would seek sanctions pursuant to section 1038 if the complaint was not dismissed, but “[t]he warning went unheeded.” PROCEDURAL BACKGROUND The trial court granted summary judgment to the State and City on the ground that the action was barred by a statutory immunity for injuries caused by a natural condition of unimproved public property such as a beach. The State and City then sought attorney’s fees and costs pursuant to section 1038. The trial court found that Plaintiff had been put on notice of the applicable immunities afforded to State and City, but Plaintiff “proceeded with the action without any evidence to overcome the immunities. No reasonable plaintiff would have maintained this action against the City and the State.” Accordingly, the court ordered Plaintiff and her attorney to pay $11,457.65 attorney’s fees and costs pursuant to section 1038. Plaintiff’s attorney solely appealed.

CALIFORNIA COURT OF APPEAL DECISION The Court of Appeal reversed the order of the trial court imposing defense costs on Plaintiff’s counsel pursuant to section 1038. According to the court, section 1038 does not authorize defense costs against counsel. Code of Civil Procedure section 1038 provides for mandatory defense costs where the trial court determines that a plaintiff did not bring “the proceeding with reasonable cause and in the good faith belief that there was a justiciable

270 controversy under the facts and law which warranted the filing of the complaint . . .” Defense costs include reasonable attorney’s fees. Cal. Civ. Proc. Code § 1038 (b). The words “counsel,” “counsel for plaintiff” or “plaintiff’s attorney” are not in the statute. Therefore, Plaintiff’s attorney argued that section 1038 does not authorize the imposition of defense costs against counsel. The court agreed. According to the court, the court “cannot add or substitute words in a statute,” so “[u]nless and until the Legislature amends section 1038 to authorize an award of ‘sanctions’ against counsel, defense costs and fees may not be imposed against counsel” pursuant to section 1038. CONCLUSION The Court of Appeal held “that section 1038 defense costs which includes attorney fees may not be imposed on plaintiff’s attorney even if counsel lacks reasonable cause and good faith in filing or maintaining a tort action against a public entity.”

THE CLAIMS PRESENTATION REQUIREMENTS APPLY TO SUITS ALLEGING INTENTIONAL TORTIOUS CONDUCT BROUGHT AGAINST ELECTED OFFICIALS AND THE PUBLIC ENTITY PURSUANT TO GOVERNMENT CODE SECTION 815.3 8. Gong v. City of Rosemead, 226 Cal. App. 4th 363 (2014). BRIEF SUMMARY The primary issue in this case is whether the 1994 Amendment to the Government Claims Act requires the presentation of an administrative tort claim to the public entity prior to the bringing of an action for money or damages against the elected officials and the public entity. The Amendment applies only to “elected officials.” FACTUAL BACKGROUND Plaintiff Tammy Gong was the managing partner of Plaintiff L&G Rosemead Garden LLC (“L&G”). Around 2004, L&G spent approximately $780,000 to acquire certain undeveloped land in the City of Rosemead, California. The property was approved by the City for construction of an office building. In 2005, John Tran, the City’s mayor, learned of L&G’s plan when Gong went to City Hall to obtain a building permit so that L&G could commence construction. Tran suggested that the City would support the plan if Gong would instead construct a mixed-use building (“City Endorsed Plan”). As a result of her encounter with Mayor Tran, Gong did not draw the permit, which she had intended to do before meeting Tran. City officials contacted Gong at the request of Tran to schedule a meeting to discuss the City Endorsed Plan. Gong was advised that in order to proceed with

271 the original plan, L&G needed to acquire a lot adjoining the original parcel. After meeting with Tran and other City officials, Gong was convinced to proceed with the City Endorsed Plan. While L&G applications were pending, Tran asked Gong for personal loans due to a purported family emergency and for other reasons. Ultimately, she loaned Tran a total of $38,000. During that time frame, Tran attempted to engage Gong in a romantic relationship, but Gong declined. However, Tran was not deterred and commenced a retaliatory course of conduct against Gong which included causing the final decision on the City Endorsed Plan to be indefinitely tabled. Gong still refused additional financial and romantic overtures from Tran and demanded the return of her money. Tran refused to do so, and threatened to kill her if she reported him to the authorities. The FBI conducted an investigation and ultimately Tran pled guilty to federal charges of extortion and fraud. PROCEDURAL BACKGROUND Gong and L&G presented an administrative claim to the City pursuant to the Government Claims Act, Government Code section 900, et. seq. The claim alleged essentially that City officials forced Plaintiffs to purchase property to build the Mixed-Use Project, but when the plan check was completed, Mayor Tran prevented Plaintiffs from building on the property due to changes in City policy. The City rejected the claim. Plaintiffs then filed an action against Tran for money lent; against the City for promissory estoppel; and for fraud and extortion, assault and battery, and intentional infliction of emotional distress against both Tran and the City. The City demurred to the complaint on multiple grounds. The primary basis for the demurrer was Plaintiffs’ failure to comply with the claims presentation requirements. The trial court sustained Defendants’ demurrer without leave to amend, and entered a judgment of dismissal. Plaintiffs filed a timely notice of appeal. CALIFORNIA COURT OF APPEAL DECISION The Court of Appeal affirmed the order of the trial court sustaining the City’s demurrer without leave to amend. Among other grounds, the court held that although Plaintiffs filed timely claims for money damages with the City, Plaintiffs’ action was nevertheless barred because the allegations in the complaint in no way corresponded with the allegations in the claims presented to the City. A. Government Code Section 815.3 In 1994, the Legislature amended the Government claims statute to add section 815.3, which applies only to “elected officials.” The new section requires joinder of the elected official in order to pursue a cause of action against the public entity involved. In addition, section 815.3 shifts the liability from the public entity to the elected official in cases of sexual harassment and other tortious acts committed outside the scope of employment. Further, under section 815.3, the

272 injured party must first seek recovery from the assets of the elected official before seeking recovery from the public entity. Here, Plaintiffs contended that section 815.3 created a new substantive cause of action for intentional torts of elected officials which did not require the presentation of a governmental claim prior to the filing of a lawsuit. The Court of Appeal did not agree. According to the Court of Appeal, there is nothing in the legislative history of section 815.3 which supports Plaintiffs’ contention that the Legislature silently eliminated the claim requirement “when enacting a statute requiring Plaintiffs to name as a defendant the elected official for whose intentional tort they seek compensation from the public fisc.” B. The Facts Alleged in the Complaint Must be Consistent With the Facts Contained in the Government Claims Filed With the City Here, it was uncontroverted that timely claims were filed with the City. However, according to the court, it was clear that the factual allegations in the complaint did not correspond with the allegations in the claims filed with the City. In order to comply with the claim presentation requirements, the facts alleged in the complaint filed in the trial court must be consistent with the facts alleged in the government claim previously presented to the public entity See Williams v. Southern California Gas Co., 176 Cal. App. 4th 591, 597-598 (2009). Here, the complaint alleged that the City was vicariously liable as a result of Tran’s alleged tortious acts of fraud, extortion, assault and battery, harassment and intentional infliction of emotional distress. The complaint also alleged that Tran fraudulently promised the City would approve L&G’s development plans, extorted $38,000 in loans from Gong, sexually harassed, physically assaulted, and threatened to kill her. None of the allegations contained in the complaint were included in the Government claims that were presented to the City. According to the court, “[t]”he claims only refer to L&G’s failed development project caused by changes in the composition of the City Council and the City’s policies.” Accordingly, although the administrative claims were timely filed with the City, the Court of Appeal concluded that they did not reflect the causes of action subsequently brought by Plaintiffs based on Tran’s alleged tortious conduct. Therefore, the Court of Appeal held that the trial court properly sustained the City’s demurrer to the tort causes of action for a “total failure” to comply with the claim presentation requirements.

273

This page left intentionally blank.

274

Complying with the Americans with Disabilities Act (Accessibility Barriers and Improvements)

Friday, September 5, 2014 General Session; 10:15 a.m. – 12:00 p.m.

Bruce A. Soublet, Sr. Assistant City Attorney, Richmond

275 Notes:______

276

COMPLYING WITH THE AMERICAN WITH DISABILITIES ACT (ADA) (Accessibility Barriers and Improvements)

BRUCE A. SOUBLET Sr. Assistant City Attorney/ ADA Coordinator, City of Richmond LaTisha McCray Attorney at Law

277 EQUAL ACCESS: REMOVING PHYSICAL BARRIERS

1. INTRODUCTION

The prevention of discrimination based on disability is a relatively new area of law. It started with Section 504 of the Rehabilitation Act of 1973, which was followed in 1990 by the adoption of the Americans with Disabilities Act (ADA). Title II of the ADA is the section that governs the activities of public entities. The language of the act is rather simple—it requires that all programs, services and activities of the entity must be accessible for individuals with disabilities. The difficulty lies in the application of the act to an entity’s day-to-day functions. This paper will attempt to provide some helpful guidance on how to accomplish the goals of the ADA.

2. LEGAL STANDARDS

The prevention of discrimination on the basis of disability is housed in several different statutes. The laws apply to various government actions and differ in their approach and application, as discussed below.

A. Section 504 of the Rehabilitation Act of 1973

The Rehabilitation Act prohibits discrimination on the basis of disability: (i) in programs conducted by Federal agencies; (ii) in programs receiving Federal financial assistance; (iii) in Federal employment: and (iv) in the employment practices of Federal contractors. The standards for determining employment discrimination under the Rehabilitation Act are the same as those used in Title I of the Americans with Disabilities Act.

B. Americans with Disabilities Act of 1990 (ADA)

The ADA prohibits discrimination on the basis of disability in employment, state and local government, public accommodations, commercial facilities, transportation, and telecommunications. It also applies to the United States Congress.

C. California Fair Employment and Housing Act (FEHA)

The FEHA (Cal. Gov. Code § 12900, et seq.) makes it unlawful for an employer to harass or discriminate against any individual on the basis of a mental or physical disability.

D. The Unruh Civil Rights Act (“Unruh”),

The Unruh Act (Cal. Civil Code § 51, et seq.) makes it unlawful for a business establishment, including housing and public accommodations, to discriminate against any individual on the basis of a disability.

3. Title II of the ADA

Title II of the ADA is the section that applies to public entities. It requires that all programs, services and activities of the entity must be accessible to individuals with disabilities.

278 a. The Basic Rule

To be protected by the ADA, one must have a disability or have a relationship or association with an individual with a disability. An individual with a disability is defined by the ADA as: (i) a person who has a physical or mental impairment that substantially limits one or more major life activities, (ii) a person who has a history or record of such impairment, or (iii) a person who is perceived by others as having such impairment. The ADA does not specifically name all of the impairments that are covered.1

b. Establishing a Violation of Title II

Before an individual can file a claim alleging that he or has experienced discrimination on the basis of his or her disability and has been excluded from an entity’s services, programs and activities, they must suffer from a recognized disability.

An individual has disability for purpose of ADA coverage if he or she meets any of the following: 1) A physical or mental impairment that substantially limits one or more major life activities of such individual, 2) a record of such impairment, or 3) is regarded as having such impairment.2 The plaintiff has the burden to establish his or her case.

If a plaintiff is able to establish that he or she has a recognized disability as required under the first prong under the test below, he or she must satisfy the remaining prongs to bring a claim under program accessibility/Title II violation. The plaintiff must establish that:

1. he/she is qualified individual with a disability; 2. He/she was either excluded from participation in or denied the benefits of a public entity’s services, programs, or activities, or was otherwise discriminated against by the public entity; and 3. This exclusion, denial, or discrimination was by reason of his/her disability.3

i. Physical or mental impairment

An individual must have a physical or mental impairment. The term “impairment” is modeled after the definition of impairment used in section 504 of the Rehabilitation Act. Impairment includes: “any physiological disorder or condition, cosmetic disfigurement, or anatomical loss affecting one or more of the following body systems: neurological; musculoskeletal; special sense organs (which would include speech organs that are not respiratory such as vocal cords, soft palate, tongue, etc.); respiratory, including speech organs; cardiovascular; reproductive; digestive; genitourinary; hemic and lymphatic; skin; and endocrine. It also means any mental or

1 http://www.ada.gov/cguide.htm#anchor62335 2 29 C.F.R § 35.104(4) 3Cohen v. Culver City (9th Cir. 2014) 754 F.3d 690

279 psychological disorder, such as mental retardation, organic brain syndrome, emotional or mental illness, and specific learning disabilities.”4

This definition excludes homosexuality and bisexuality because they were never considered impairments under other Federal disability laws. Additionally, this definition excludes: “simple physical characteristics, such as blue eyes or black hair. Nor does it include environmental, cultural, economic, or other disadvantages, such as having a prison record, or being poor. Nor is age a disability. Similarly, the definition does not include common personality traits such as poor judgment or a quick temper where these are not symptoms of a mental or psychological disorder.”5

ii. Record of Such Impairment

An individual is considered disabled for purposes of ADA coverage if he or she had a record of an impairment that substantially limits a major life activity. This includes anyone who has been misclassified as having such impairment. The purpose of this provision is to protect individuals who have recovered from past impairments but are substantially limited in a major life activity6.

iii. Being Regarded as Having an Impairment

This test applies when an individual is treated by the public as though he or she has an impairment that substantially limits a major life activity, even if the individual does not in fact have such impairment. Under this test, public (third party) perception is essential. However, perception is irrelevant where an individual perceives himself or herself as having a recognized impairment.7

Further, this test is applicable if an individual experiences discrimination in that he or she is denied benefits, services, or is refused admittance by the public entity based on a thoughtless misperception.8

iv. Substantially Limits This provision of the test explains the degree in which an individual must be affected by his or her impairment. This provision applies to all three tests for determining whether an individual has a disability for purposes of ADA coverage. To be considered for ADA coverage, the individual’s life activities must be “restricted as to the condition, manner, or duration under which they can be performed” in comparison to an individual without a disability. This explanation generally excludes temporary or transitory impairments, but a temporary impairment may qualify for coverage depending on the circumstances.9

4 28 C.F.R. § 35 app. B 5 28 C.F.R. § 35 app.B 6 28 C.F.R. § 35 app.B 7 28 C.F.R. § 35 app.B 8 28 C.F.R. § 35 app.B 9 28 C.F.R. § 35 app.B

280

v. Major Life Activities

Generally: caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working, AND

Bodily Functions: functions of the immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive functions.10

c. Program Accessibility Standard

The concept of program accessibility was adopted/modeled from section 504 concerning federally assisted programs and activities in 1977. This section allowed recipients of federal funding to make their programs and activities available to individuals without extensively retrofitting their existing facilities by providing the programs and services through alternative means.11

In determining program accessibility the ADA requires that we analyze whether that service, program, or activity, when viewed in its entirety, is readily accessible to and usable by individuals with disabilities. As part of that analysis we must ensure that individuals with disabilities are not excluded from services, programs, and activities because buildings are inaccessible. The result of the analysis may require the entity to make reasonable modification to policies, procedures, or practices, to accommodate for the needs of the disabled person(s).

The Public Entity has discretion in addressing accessibility issues. It does not have to make all of its existing facilities accessible to and usable by individuals with disabilities. Structural changes can be excused in place of other effective methods for achieving program access, such as relocation to an accessible space, personal aides to accommodate the particular disability, or providing services) in an individual’s home.

In addition to the discretion provided public entities, public entities are afforded additional protection through the safe harbor provision, which provides that the public entity would be “entitled to a safe harbor for already compliant elements until such elements are altered.” The rationale for supporting the safe harbor provision is that it would allow funding to be used toward entity-wide program access rather than being wasted on repeated retrofitting.12

i. Program Inaccessibility Is Prohibited

10 42 U.S.C.A. § 12102(2) 11 28 C.F.R. § 35 app.B 12 28 C.F.R. § 35app. A

281 The program accessibility standard provides “…no qualified individual with a disability shall, because a public entity's facilities are inaccessible to or unusable by individuals with disabilities, be excluded from participation in, or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any public entity.”13 This includes intentional and disparate impact. 14

Where a plaintiff brings a claim against a public entity on the basis that he or she was unable to access its programs, the establish a prima facie claim, the plaintiff must establish, “(1) prove that the [program], when viewed in its entirety, is not readily accessible to and usable by individuals with disabilities; and (2) suggest a plausible method of making the [program]readily accessible, the costs of which, facially, do not clearly exceed its benefits.”15

In determining if the public entity’s program discriminates, the court will consider “(1) whether the plaintiff meets the program's stated requirements in spite of his/her handicap, and (2) whether a reasonable accommodation could allow the handicapped person to receive the program's essential benefits.16

ii. Existing Facilities

The term “existing facility” is not expressly defined but it is written into regulations for Title II. The term “existing facility” applies/includes newly constructed or altered facilities with a continuing program access obligation. This is because the identification of facilities under the ADA is neither static nor mutually exclusive. This definition accounts for the fact that a facility constructed or altered after the effective date of the original title II regulation but prior to the effective date of the revised title II regulation and Standards, must have been built or altered in compliance with the Standards in effect at that time, in order to be in compliance with the ADA. This interpretation reflects the Departments view that public entities have program access requirements that are independent of, but may coexist with, requirements imposed by new construction or alteration requirements in those same facilities.

As briefly mentioned above, the existing facilities requirement has some exceptions. They are that, a public entity does not have to make all of its facilities accessible to and usable by individuals with disabilities. A public entity does not have to take any action that would threaten or destroy the historic significance of a historic property. Lastly, it does not have to take any action that would result in a fundamental alteration in the nature of a service, program or activity, or that would result in an undue financial hardship 17or administrative burden. Despite these exceptions, the public entity must still comply with its overarching

13 28 C.F.R. § 35.149 14 Crowder v Kitagawa (9th Cir. 1996) 81 F. 3d 1480 15 Pascuiti v. New York Yankees (S.D.N.Y. 1999) 87 F.Supp.2d 221,223. 16Easley by Easley v. Snider (3d Cir. 1994) 36 F.3d 297,303. 17 Please note: “Congress wanted to permit a cost defense only in the most limited circumstances.” (Olmstead v. L.C. ex rel. Zimring (1999) 527 U.S. 581, 595)

282 obligation not to exclude individuals with disabilities from accessing its services, programs, and/or activities.18

1. Ways to Making Existing Facilities Accessible

Generally, a public entity may comply with accessibility requirements by: redesigning or acquiring equipment, reassigning services to accessible buildings, assigning aides to beneficiaries, providing home visits or delivering services at alternate accessible sites, altering existing facilities and constructing new facilities19, using accessible rolling stock or other conveyance, or any other method that would result in making its services, programs, or activities readily accessible to and usable by individuals with disabilities.20

Because this list provides other methods to achieve compliance, a public entity is not required to make alterations or construct new facilities where other effective methods of achieving compliance are available21.

When public entities are determining ways in which to make its facilities accessible, it must give priority to those methods that will allow individuals with disabilities to be in an integrated setting.22

One method that will NOT achieve accessibility is for a public entity to provide carrying services. Carrying and individual with a disability to achieve accessibility will be unsuccessful because it is contrary to the individual’s independence. However, there are limited circumstances in which temporary carrying may be permitted. Temporary carrying may be permitted where: (1) when program accessibility can only be achieved in existing facilities through structural facilities – carrying may be a temporary solution during construction, and (2) carriers are formally instructed on the safest and least humiliating means of carrying and (b) the service is provided in a reliable manner. 23

2. Defenses – Existing Facilities

In determining whether financial and administrative burdens are undue, all public entity resources available for use in the funding and operation of the service, program, or activity should be considered. The burden of proving that compliance with paragraph (a) of §35.150 would fundamentally alter the nature of a service, program, or activity or would result in undue financial and administrative burdens rests with the public entity. 24

18 http://www.ada.gov/reg2.htm 19 (Altering or constructing new facilities will be subject to accessibility standards of 28 CFR 35.151.) 20 28 C.F.R. § 35.150(b)(1) 21 Structural changes in existing facilities are required only when there is no other feasible way to make the public entity's program accessible. http://www.ada.gov/reg2.htm 22 http://www.ada.gov/reg2.htm 23 http://www.ada.gov/taman2.html 24 http://www.ada.gov/reg2.htm

283 3. Fundamental Alteration

Another manner fundamental alteration used when determining reasonableness of a public entity’s modification is “first, an alteration affecting an essential aspect of a defendant's policies or programs would be unacceptable even if applied to everyone equally; second, even a minor change might be unacceptable if it gave a disabled individual an advantage over others.”25 • For Example, In the Martin26 case, both the Ninth Circuit and the Supreme Court held that permitting Casey Martin to use a golf cart, despite the PGA Tour's rule requiring participants to walk, would not fundamentally alter the nature of the competition.27

Undue Burden Another means of determining if a public entity’s modifications are reasonable is through the undue burden test. Undue “refers to any accommodation that would be unduly costly, extensive, substantial, or disruptive, or that would fundamentally alter the nature or operation of the business.”28 In determining whether an action would result in an undue burden, factors to be considered include: (1) The nature and cost of the action needed under this part; (2) The overall financial resources of the site or sites to the involved in the action: the number of persons employed at the site, the effect on expenses and resources, legitimate safety requirements necessary for safe operation, including crime prevention measures, or the impact otherwise of the action upon the operation of the site; (3) A public entity may not invoke this defense where it undertakes new construction or alterations of an existing facility subject to 28 C.F.R. 35.151.29

iii. New Construction

When a public entity decides to construct or alter a facility, the facility must be designed and constructed in such a manner that the facility is readily accessible to and usable by individuals with disabilities if the construction began after January 26, 1992.30 This requirement is imposed when physical construction is commenced.31 Unlike the existing facility requirement, this requirement reflects a strict compliance standard for new construction and/or alterations because “architectural barriers” can be avoided at little to no cost during the construction phase.32

Because new construction is held to a strict standard of compliance, the undue financial burden expense defense is not applicable. However, a public entity may defend a potential violation of

25Matthews v. NCAA (E.D. Wash. 2001) 179 F.Supp.2d 1209, 1225. 26 PGA Tour, Inc. v. Martin (2001) 532 U.S. 661 [121 S.Ct. 1879, 1884-85, 149 L.Ed.2d 904] 27 Matthews v. NCAA (E.D. Wash. 2001) 179 F.Supp.2d 1209, 1225 28 http://www.ada.gov/briefs/denv1br.pdf . 29 Willits v. City of Los Angeles (C.D. Cal. 2013) 925 F.Supp.2d 1089, 1094. 30 28 C.F.R. § 35.151(a) 31 28 C.F.R. § 35.151(c)(3)(4) 32 Anderson v. Pennsylvania Dept. of Public Welfare (E.D. Pa. 1998) 1 F.Supp.2d 456, 464.

284 the new construction requirement where it is structurally impracticable to construct the facility to be readily accessible.

1. Exception to New Construction - Structural impracticability

Structural Impracticability Occurs:

 (i) Full compliance with the requirements of this section is not required where a public entity can demonstrate that it is structurally impracticable to meet the requirements. Full compliance will be considered structurally impracticable only in those rare circumstances when the unique characteristics of terrain prevent the incorporation of accessibility features.

 (ii) If full compliance with this section would be structurally impracticable, compliance with this section is required to the extent that it is not structurally impracticable. In that case, any portion of the facility that can be made accessible shall be made accessible to the extent that it is not structurally impracticable

 (iii) If providing accessibility in conformance with this section to individuals with certain disabilities (e.g., those who use wheelchairs) would be structurally impracticable, accessibility shall nonetheless be ensured to persons with other types of disabilities, (e.g., those who use crutches or who have sight, hearing, or mental impairments) in accordance with this section. (28 CFR 35.151(a)(2).)

2. What If Alterations are Done?

An alteration is “a change to a building or facility that affects or could affect the usability of the building or facility or part thereof.”33 Alterations of streets, roads, or highways include activities such as reconstruction, rehabilitation, resurfacing, widening, and projects of similar scale and effect.34 Alterations to existing facilities and new construction must, “to the maximum extent feasible, be altered in such a manner that the altered portion of the facility is readily accessible to and usable by individuals with disabilities. 35 This definition of alteration excludes maintenance activities on streets, roads and highways, such as filling potholes.36

Some maintenance activities include: Treatments that serve solely to seal and protect the road surface, improve friction, and control splash and spray are considered to be maintenance because they do not significantly affect the public's access to or usability of the road. Some examples of the types of treatments that would normally be considered maintenance are: painting or striping lanes, crack filling and sealing, surface sealing, chip seals, slurry seals, fog seals, scrub sealing, joint crack seals, joint repairs, dowel bar retrofit, spot high-friction

33 Kinney v. Yerusalim (3d Cir. 1993) 9 F.3d 1067,1072. 34 http://www.ada.gov/doj-fhwa-ta.htm 35 Kinney v. Yerusalim (3d Cir. 1993) 9 F.3d 1067, 1074 36 http://www.ada.gov/doj-fhwa-ta.htm

285 treatments, diamond grinding, and pavement patching. In some cases, the combination of several maintenance treatments occurring at or near the same time may qualify as an alteration and would trigger the obligation to provide curb ramps.37

d. Recreational Facilities: Swimming Pools

Generally, a “City is not required to offer to the public (disabled or non-disabled) any type of recreational or leisure programs in the first place, when it does provide and administer such programs, it must use methods or criteria that do not have the purpose or effect of impairing its objectives with respect to individuals with disabilities.” 38 This is supported because people with disabilities, for far too long, have been excluded from participating in many recreational activities.

Swimming is one of the recreational activities of which people with disabilities have been excluded. However, the revised 2010 Standards have changed that. For the first time, the 2010 Standards set minimum requirements for making swimming pools, wading pools, and spas (pools) accessible. Newly constructed and altered pools must meet these requirements. Public entities and public accommodations also have obligations with respect to existing pools. State and local governments must make recreational programs and services, including swimming pool programs, accessible to people with disabilities…Program accessibility applies to all pool- related programs, services, and activities (swimming programs). Program accessibility does not typically require that every pool be made accessible. However, if a public entity has only one existing pool, it must take steps to ensure that its swimming program at that pool is accessible. 39

1. Pool Basics

Generally, a pool should have at least two accessible means of entry with two different types of entries and located at different locations of the pool. However, if a swimming pool has less than 300 linear feet (91 m) of swimming pool wall, no more than one accessible means of entry is required provided that the accessible means of entry is a swimming pool lift that complies with section (1009.2) or a sloped entry that complies with section (1009.3).40

A public entity may make a pool accessible by installing any of the following: 1) swimming pool lifts that complies with section (1009.2); 2) sloped entries that comply (1009.3); 3) transfer walls that comply with (1009.4); 4) transfer systems that comply with (1009.5); and 5) pool stairs that comply with (1009.6).41

37 http://www.ada.gov/doj-fhwa-ta.htm 38 Concerned Parents to Save Dreher Park Center v. City of West Palm Beach (S.D. Fla. 1994) 846 F.Supp. 986, 991. 39 http://www.ada.gov/pools_2010.htm 40 2010 Design Standards – Section 242 41 2010 Design Standards – Section 242

286 The accessible pool requirement also encompasses other form of water recreational activities such as, wave action pools, leisure rivers, sand bottom pools and other pools. For the aforementioned, a public entity is not required to provide more than one accessible means of entry, where user access is limited, provided that the accessible means of entry is a swimming pool lift that complies with section 1009.2, a sloped entry that complies with section 1009.3, or a transfer system that complies with 1009.5.42 Catch pools shall not be required to provide an 43 accessible means of entry provided that the catch pool edge is on an accessible route.

e. On-Street Parking

Currently, there are no adopted regulations that address on-street parking.44 However, as a City program, on-street parking needs to be accessible to persons with disabilities per Title II of the ADA. This is supported by the fact that the 2010 Design Standards impose certain technical requirements with respect to accessible parking in section 208 and 502, such as a minimum number of accessible parking spaces.

On the other hand, because there are no regulations expressly addressing parking requirements, there is an argument that Cities are not/should not be required to provide accessible parking. But, the District court in Fortyune disagreed with the opposing argument and held “…the broad language of the ADA requires public entities to ensure that all services, including on-street parking, are reasonably accessible to and usable by individuals with disabilities.”45

In support of not requiring City’s to provide accessible parking until there are express regulations, the California League of Cities filed an Amicus Curiae brief arguing the following points: 1) Requiring cities to provide on-street disabled parking without any Standards or guidelines is contrary to the purpose of the ADA and will lead to inconsistency in on-street parking; 2) Requiring cities to provide on-street disabled parking without any guidelines or standards would waste cities’ limited resource and invite litigation; 3) Public entities cannot reasonably rely on ADAAG or the Draft Right-of-Way guidelines to ensure compliance with any on-street parking obligations.

At this time it appears that City’s should provide accessible parking in order to comport with the spirit of the Program Accessibility Standard of Title II despite the absence of express regulations.

f. Curb Ramps A curb ramp is a short ramp cutting through a curb or built up to it, which is designed and constructed to be accessible, thus providing an accessible route that persons with disabilities

42 2010 Design Standards – section 242 43 2010 Design Standards 44 Fortyune v. City of Lomita (C.D. Cal. 2011) 823 F.Supp.2d 1036 45 Fortyune v. City of Lomita (C.D. Cal. 2011) 823 F.Supp.2d 1036, 1038.

287 can use to safely transition from road way to curbed sidewalk and vice versa. 46 There is an express requirement to include the provision of curb ramps in transition plans47 and a requirement to include provisions for curb ramps in newly altered or constructed facilities.48

Generally, curb ramps are needed wherever a sidewalk or other pedestrian walkway crosses a curb. Curb ramps must be located to ensure a person with a mobility disability can travel from a sidewalk on one side of the street, over or through any curbs or traffic islands, to the sidewalk on the other side of the street. However, the ADA does not require installation of ramps or curb ramps in the absence of a pedestrian walkway with a prepared surface for pedestrian use. Nor are curb ramps required in the absence of a curb, elevation, or other barrier between the street and the walkway.49

g. Service Animals 1. Dogs

Title II of the 1991 regulation does not specifically address service animals. However, public entities subject to the Title II must make reasonable modifications in its policies, practices, and/or procedures to allow service animals in order to avoid discrimination against individuals with disabilities. In an effort to clarify public entity confusion, the Department saw the need to define (clarify) the term service animal.

A service animal is “any dog that is individually trained to do the work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability.” This definition of service animal expressly excludes any other species of animal from being included in the definition of a service animal under the ADA.

Service animals have mandatory characteristics. A service animal must work and perform tasks that directly benefit the individual with a disability. It must be able to recognize and respond to the individual’s distress. The response requirement is significant because it is what distinguishes an animal (dog) as a service animal. Animals that provide comfort and emotional support cannot satisfy the requirements of a service animal because they cannot respond to an individual with a disability who is experiencing a type of distress.

Service animals enjoy additional freedoms that benefit their handlers. They are not subject to size or weight limitations. The rationale behind this is that such a restriction may cause difficulty for the handler in choosing a service animal because they correlate to the needs of the handler. For example, a small service may not be suitable to a larger handler because of the handler’s needs, such as pulling his or her wheelchair.

46http://www.ada.gov/comprob.pdf 47 28 C.F.R. § 35.150(d)(2) 48 28 C.F.R. § 35.151(i) 49 http://www.ada.gov/doj-fhwa-ta.htm

288 Service animals are not subject to breed restrictions because the ADA already provides significant authority to exclude a service animal for inappropriate behavior and not based on generalized fears and speculation.

Though service animals enjoy many freedoms, and public entities are required to make reasonable modifications in its policies, procedures and practices, they are not without restrictions. A public entity has the authority to remove and/or deny a service animal access if it is out of control and acting unreasonably and it may be excluded from access if it is not house-broken. When deciding to remove or deny access, a public entity should consider all the facts before making a determination to ensure that the decision is warranted.

A public entity may inquire whether an animal constitutes a service animal. However, the inquiry must be limited to extracting essential information without intruding upon confidential disability related information. For example, the public entity may ask if the animal is required because of a disability and what task(s) or work is it trained to do.50

2. Miniature Horses

Additional provisions were made to include miniature horses as acceptable service animals. Miniature horse are generally twenty-four (24) to thirty-four (34) inches in height and weigh between seventy (70) to one-hundred (100) pounds.

When a public entity encounters a situation in which an individual with a disability needs to use a miniature horse to access its programs, services or activities, a public entity must make reasonable modifications for the individual. In making its determination(s), the public entity may use four factors to determine whether the miniature horse may be accommodated in its facility: 1) whether the miniature horse is housebroken, 2) whether the miniature horse is under the owner’s control, 3) whether the public entity can accommodate the miniature horse’s size, type and weight, and 4) whether the miniature horse’s presence will not compromise legitimate safety requirements necessary for safe operation of the facility.51

h. How Can Public Entity’s Comply?

The first step is to conduct a self-evaluation. The requirement of a self-evaluation plan is modeled after section 504. This requirement is essential to determining a public entities’ compliance by evaluating its current policies and practices to identify and correct any that are inconsistent with program access.

All public entities are required to perform a self-evaluation by January 26, 1993. Where a public entity employs 50 or more persons, the self-evaluation is required to remain on file and accessible by the public for three (3) years. Even though public entities employing less than

50 28 C.F.R. § 35app. A . 51 http://www.ada.gov/service_animals_2010.htm

289 fifty (50) people are not required to maintain its self-evaluation plan, it is advisable that the plan is maintained for liability reasons.52

After concluding the self-evaluation, the next step is for the public entity to generate a transition plan that will identify the necessary steps to remedy any areas of noncompliance and the timeline for completion. It is advisable that the transition plan consider public comment and input. The transition plan must be developed within six (6) months of January 26, 1992 where a public entity employs fifty (50) or more people. Specifically, it should address: 1) limiting physical obstacles, 2) identifying detail-oriented remedial methods, 3) the time necessary to achieve compliance if the time is longer than one year, 4) steps that will be taken during each year of the transition period, and 5) identify an official with decisional and budgetary authority for implementing the terms.53

a. Existing Plans

If a public entity already has a transition plan, then here are some questions it may consider: 1) has the entity done a reassessment? If so, has anything changed? 2) has it added new programs? 3) has it remodeled or constructed new facilities? 4) has its web based presence/activities changed? 5) has it had staffing changes? 6) has it “privatized” anything? 7) have the regulations changed (local or federal)? 8) if it has a plan, is it following it? 9) is its plan current?54

3. Important ADA Dates

 http://www.ada.gov/qandaeng.htm . January 26, 1992-Effective date for State and Local Govt. . January 26, 1995-Structural Changes needed for program accessibility . July 26, 1992- Transition Plans musts be developed  http://www.adasoutheast.org/ada/publications/ADA_Revised_Regulations_March-15- 2011.htm . March 15, 2011 – Revised ADA Regulations Affecting Title II became effective  Program Accessibility Dates (http://www.ada.gov/revised_effective_dates-2010.htm) . From September 15, 2010, to March 15, 2012, State and local governments (public entities) have the option of choosing to follow the 1991 Standards, the UFAS, or the 2010 Standards when making architectural changes to provide program access. The elevator exception in the 1991 Standards may not be used. . On or after March 15, 2012, public entities must comply with the 2010 Standards in making architectural changes to achieve program accessibility and for all new construction and alterations.

52 28 C.F.R. § 35app. B 53 28 C.F.R. § 35.150; http://www.ada.gov/qandaeng.htm 54 file:///C:/Users/Owner/Downloads/6A)%20Jones%20Self%20Evaluation%20and%20Transition%20Plans%20Part%20I%20(1).pdf

290 . On or after March 15, 2012, public entities must consider the supplemental requirements (such as swimming pools, play areas, and fishing piers) in the 2010 Standards to assess compliance with program accessibility. . Please Note: If elements in existing facilities already comply with corresponding elements in the 1991 Standards or the UFAS and are not being altered, then title II entities are not required to make changes to those elements to bring them into compliance with the 2010 Standards.

///

Program Accessibility Scenarios  Abe is a senior citizen who was visiting Do Good, CA for the funeral of his best friend. Unfortunately, Abe suffers from dementia and has difficulty navigating. Evilina, a local psychic had set up a table outside of Abe’s hotel to read palms for $5. Evilina mailed in her permit request to the Do Good City, but in her haste, she forgot to complete the address. Evilina’s table was beautiful and colorful and was located near the curb ramp outside of Abe’s hotel. Abe was very tired and ready for his afternoon nap, he looked to his left and saw another curb ramp about 20 steps away, but he decided to walk around Evilina’s table and step up on the sidewalk because it was quicker. Sadly, while Abe was trying to step up onto the sidewalk, he tripped and fell and sustained moderate injuries. Is there a violation under program accessibility?55

Program Accessibility Scenarios  A public entity may succeed on an undue burden defense when it is asserted for construction or an alteration taking place in 2014? True or False?

A: Such a defense is foreclosed under Title II of the ADA with respect to streets, pedestrian rights of way, sidewalks, and curb ramps that have been newly constructed or altered since January 26, 1992…”56

Program Accessibility Scenario  Harry and Sally have been married for 50 years and are celebrating their 50th anniversary with a vacation to Hawaii. Sadly, Harry and Sally both lost their eyesight in an unfortunate accident 10 years ago. They each have a golden-retriever guide dog. Upon arriving to Hawaii, they are informed that the dogs have to be quarantined for 90 days before entering. Harry and Sally are permitted to stay with the dogs but they cannot leave the premises with the dogs until the 90 days is up. Harry and Sally have filed suit alleging violation of Title II of ADA, will they be successful?  Alternate facts: Hawaii offered Harry and Sally two guide dogs to use in the place of their dogs during the quarantine period, but Harry and Sally refused. Would they be

55Cohen v. City of Culver City (9th Cir. 2014) 754 F.3d 690 56Willits v. City of Los Angeles (C.D. Cal. 2013) 925 F.Supp.2d 1089.

291 successful under this set of facts? (Caution: there is no answer to this alternate factual scenario.)

Program Accessibility Illustration  Generally…  Illustration 1: When a city holds a public meeting in an existing building, it must provide ready access to, and use of, the meeting facilities to individuals with disabilities. The city is not required to make all areas in the building accessible, as long as the meeting room is accessible. Accessible telephones and bathrooms should also be provided where these services are available for use of meeting attendees.  Illustration 2: D, a defendant in a civil suit, has a respiratory condition that prevents her from climbing steps. Civil suits are routinely heard in a courtroom on the second floor of the courthouse. The courthouse has no elevator or other means of access to the second floor. The public entity must relocate the proceedings to an accessible ground floor courtroom or take alternative steps, including moving the proceedings to another building, in order to allow D to participate in the civil suit.57

///

Resource Page  www.ada.gov  www.disability.gov  www.askJan.org  www.evanterry.com  www.access-board.gov  http://www.justice.gov/crt/about/drs/

57 http://www.ada.gov/taman2.html#II-5.0000

292

Inclusionary Housing Requirements: Still Possible?

Friday, September 5, 2014 General Session; 10:15 a.m. – 12:00 p.m.

Andrew L. Faber, Berliner Cohen

293 Notes:______

294

LEAGUE OF CALIFORNIA CITIES CITY ATTORNEYS’ DEPARTMENT

2014 Annual Conference

INCLUSIONARY HOUSING REQUIREMENTS: STILL POSSIBLE?

Andrew L. Faber, Esq. Berliner Cohen 10 Almaden Boulevard, 11th Floor San Jose, CA 95113 (408) 286-5800 [email protected] www.berliner.com

September 5, 2014 Los Angeles Convention Center Los Angeles, CA

295 Inclusionary Housing Requirements: Still Possible?

By Andrew L. Faber, Esq.

Why this paper?

A few years ago, it seemed that inclusionary housing was a concept that was straightforward in execution and pretty defensible. It had been the subject of a League City Attorneys paper every few years. About one-third of the cities in the State used some form of it to help produce affordable housing. But several events have altered the legal landscape:

• The demise of Redevelopment Agencies in 2012. • The redefining of “exactions” by the California Supreme Court in Sterling Park. • The granting of review by the California Supreme Court in the San Jose inclusionary housing case. • The possible ramifications of the decision of the U.S. Supreme Court in the 2013 Koontz case.

So in light of these developments another look at this topic is warranted.

Has the need for affordable housing increased in recent years?

Yes it has. Many cities recognize the need for affordable housing, and, of course, there are many features of State law that mandate that awareness and recognition. For example the Housing Element Law requires that a city’s housing element identify sufficient sites that have appropriate zoning and are free from other physical and regulatory obstacles to be made available for affordable housing. See Govt. Code Section 65583.2(h). As another example, cities are required to give density bonuses and make other accommodations to projects that include appropriate affordable components. See Govt. Code Section 65915; Latinos Unidos Del Valle De Napa y Solano v. County of Napa (2013) 217 Cal.App.4th 1160 (density bonus is mandatory even if the project only includes affordable housing “involuntarily” to comply with a local ordinance).

And in the good old days of redevelopment, 15% of housing in redevelopment areas had to be affordable, and the Redevelopment Agencies had to devote 20% of their tax increment revenue to affordable housing.

The need has increased recently, particularly in parts of the State such as the San Francisco Bay Area, due to a confluence of several factors. First, the demise of redevelopment and a reduction in federal programs have led to a serious drop in funding available to affordable housing. For example, in Santa Clara County, it has been estimated that total funding available for affordable housing in 2008 (the last “normal” year) was approximately $126 million. In 2013, the corresponding number was $47 million. Assuming an average subsidy of $150k per affordable unit, that would allow

296 the construction of a little over 300 affordable units per year. That number, in turn, is less than 20 percent of the Regional Housing Needs Assessment requirement (the RHNA number) for the current Housing Element cycle of 2014 to 2022, just for extremely low- and low-income housing.

The second factor has been the booming local economy. That has lowered the vacancy rate on rental housing, created a white hot real estate market for medium- to high- density multi-family housing, but, of course, also raised rents. According to economic surveys we have seen recently, rents in new construction in various Bay Area cities seem to average about $3,000 per month (and more like $3,600 in some cities). The average household income necessary to afford such rents is in the vicinity of one hundred thousand dollars per year, well above that of the average worker filling a new job in the retail sector generated by the new residents.

Even opponents of inclusionary housing or affordable housing fees concede the need for affordable housing. Generally speaking, they just don’t think developers or landowners should have to foot the bill. The major opponents are builders’ groups (e.g., California Building Industry Association) and the Pacific Legal Foundation, a property rights advocate.

How does all this relate to “inclusionary housing”?

What is called inclusionary housing is one particular way that some cities have tried to accommodate the need for affordable housing. The basic concept is to require developers to include affordable units in their projects. Typically, the affordable units must be interspersed among the market rate units, and must be of the same general design and appearance, though it is not uncommon to allow some downgrading of interior appointments in the interest of saving on construction costs.

There is a lively debate among affordable housing advocates over the desirability of using inclusionary housing. Compare, e.g., Kautz, “In Defense of Inclusionary Zoning: Successfully Creating Affordable Housing,” 36 U.S.F. L. Rev. 971 (2002) with Floryan, “Cracking the Foundation: Highlighting and Criticizing the Shortcomings of Mandatory Inclusionary Zoning Practices,” 37 Pepp. L. Rev. 1039 (2010).

Generally speaking, dispersing affordable units among market rate units is seen as egalitarian and less stigmatizing, and is an approach that furthers integration of lower income households into the main fabric of a city. It also would tend to reduce neighborhood stratification of school-age children by economic class, and thus would further the goal of non-discriminatory public education. To the extent that economic status is correlated with race or ethnicity, it would also tend to reduce racial or ethnic geographic concentration.

On the other hand, an alternative of collecting an in lieu fee that would be applied to subsidize affordable housing projects also has supporters. For one thing, it should be a more efficient method, producing more affordable housing for the same investment.

297 One reason is that a 100% affordable project can be built to a more economical standard. In addition, many developers would prefer to simply pay a fee, which they can ascertain and include in project budgets without the further complications inherent in marketing and administering the affordable units.

Didn’t the Napa case uphold inclusionary housing requirements under the city’s police power?

The Napa case, Home Builders Assn of Northern California v. City of Napa (2001) 90 Cal.App.4th 188, did indeed uphold the city’s inclusionary housing ordinance as against a facial challenge. The city’s ordinance required a ten percent affordable component in any residential subdivision, or payment of an in lieu fee. The court upheld Napa’s ordinance as a proper exercise of the city’s police powers and rejected challenges based on a takings claim and a claimed violation of due process. In addition, the ordinance contained a provision for administrative relief that the court also saw as preventing a facial challenge: When an ordinance contains provisions that allow for administrative relief, we must presume the implementing authorities will exercise their authority in conformity with the Constitution. (See Fisher v. City of Berkeley [1984 37 Cal.3d 644, 684].)

Here, as we have noted, City's ordinance includes a clause that allows city officials to reduce, modify or waive the requirements contained in the ordinance “based upon the absence of any reasonable relationship or nexus between the impact of the development and . . . the inclusionary requirement.” Since City has the authority to completely waive a developer's obligations, a facial challenge under the due process clause must necessarily fail. 90 Cal.App.4th at 199.

A similar result was reached a few years later in the Santa Monica case of Action Apartments Assn v. City of Santa Monica (2008) 166 Cal.App.4th 456.

This law seemed to be so solidly fixed that a presenter of a paper at the League City Attorneys conference in 2011 stated that there was no way that San Jose could lose its inclusionary housing case, then pending in the trial court (she was accused by the writer of this paper of potentially jinxing the case).

Up to mid-2013, the outlook was still bright for inclusionary housing in the court system. Two published opinions were helpful. The first was Trinity Park, LP v. City of Sunnyvale (2011) 193 Cal.App.4th 1014. In that case, the question was: what is an “exaction” under the Mitigation Fee Act (the “MFA,” Govt. Code Section 66001 et seq.) and more particularly Section 66020, which provides for a procedure to protest fees or exactions. In the published opinion, the Sixth District Court of Appeal held that an affordable housing requirement of the City of Sunnyvale was not an exaction under the MFA because it was not levied to help defray the costs of public infrastructure or facilities. A reasonable conclusion to be drawn from that opinion was that an affordable

298 housing requirement or in lieu fee could not be challenged for failure to meet the technical requirements of the Mitigation Fee Act.

Also, the City of San Jose had won its case in the same Sixth District Court of Appeal. The San Jose ordinance, which had not yet gone into effect on a city-wide basis (though a predecessor requirement had been in effect for years in redevelopment areas), had been enacted and was defended in court as a proper exercise of the police power. Although the ordinance contained recitals that the development of market rate housing created a need for affordable housing, the ordinance was not based upon a formal nexus study. It was a true inclusionary housing ordinance, requiring that any residential development containing more than 20 units provide 15 percent affordable units as part of the project. For-sale units could be sold to anyone earning no more than 120 percent of area median income. Like many such ordinances, it allowed for alternate performance at the developer’s option, including land dedication or payment of an in lieu fee to be calculated as the cost of providing subsidies to allow the construction elsewhere of the affordable units not provided in the project.

The San Jose ordinance was challenged by the California Building Industry Association. The challenge was not based on State or Federal Constitutional grounds (including explicitly, the “takings” clause) or on Mitigation Fee Act grounds. The petitioner’s primary objection was the lack of a nexus study, and the claim that as a result of that lack, the ordinance failed to meet the standard of San Remo Hotel v. City & County of San Francisco (2002) 27 Cal.4th 643, 671 (legislatively enacted fee “must bear a reasonable relationship, in both intended use and amount, to the deleterious public impact of the development”).

The trial court, however, issued a permanent injunction against enforcement of the ordinance in this facial challenge, in a relatively incoherent opinion that rejected the City’s police power justification. [Disclosure: the author of this paper is one of the attorneys of record for San Jose in this litigation.] On appeal, the Sixth District issued a published opinion upholding the ordinance as a valid exercise of the police power. See California Building Industry Assn. v. City of San Jose (Cal. App. 6th Dist. 2013) 2013 Cal. App. LEXIS 447, 2013 WL 2449204, formerly published at 216 Cal. App. 4th 1373.

Sounds good. Why the current worries?

Well, the California Supreme Court has stepped in with two actions that may change the legal landscape established in Napa. First, it took the opportunity to take a close look at the subject of exactions in the case of Sterling Park, L.P. v. City of Palo Alto (2013) 57 Cal.4th 1193, in the process explicitly criticizing and ultimately disapproving of the Sixth District’s holding in Trinity Park regarding the meaning of “other exactions” under the MFA. Second, it granted review in the San Jose case, thus potentially signifying its intent to take a new look at the City’s justification for the ordinance (and, of course, vacating that helpful appellate opinion).

299 Let’s discuss Sterling Park first, as this is a major development in the whole area of exactions and impact fees.

The case arose in a dispute over a statute of limitations, but the Court used it as a springboard to clarify its interpretation of the scope of the “other exaction” language in the Mitigation Fee Act. The developer in this case was required under the Palo Alto inclusionary program to set aside ten units of its 96-unit for sale project as affordable, inclusionary units. The developer did not object when the project was approved, but did file a protest letter under the Mitigation Fee Act when it came time to make an in lieu payment to the City. The trial and appellate courts, following Trinity Park, held that the MFA did not apply to this fee, since it was not for the purpose of financing public improvements; thus, the “protest” was barred by the 90-day statute of limitation contained in the Subdivision Map Act, Govt. Code Section 66499.37.

The Supreme Court rejected this argument, however, holding instead that the timeliness of the protest would be governed by the protest procedure of the Mitigation Fee Act, Govt. Code Section 66020. The Court summarized the issue and the decision of the Appellate Court as follows:

The question concerning section 66020’s applicability comes down to this: Are the requirements at issue “any fees, dedications, reservations, or other exactions” under section 66020, subdivision (a)? The Court of Appeal held that they are not.

Trinity Park, supra, 193 Cal.App.4th 1014, the case on which the Court of Appeal primarily relied in reaching its conclusion, supports the City's argument. Trinity Park, and the Court of Appeal here, interpreted the phrase “any fees, dedications, reservations, or other exactions” as being limited to fees as defined in section 66000, subdivision (b): “a monetary exaction … that is charged by a local agency to the applicant in connection with approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project․” (Italics added.) The Court of Appeal also held that the requirements at issue here were not imposed for the purpose of defraying the cost of facilities related to the proposed development. 57 Cal.4th at 1200-01.

The Supreme Court rejected the conclusion reached by the Sixth District, in part due to different interpretations of the maxim “ejusdem generis”. Summarizing where it said the Sixth District went wrong, the Court said:

Trinity Park used the canon of ejusdem generis to conclude that section 66020’s words “any fees, dedications, reservations, or other exactions” mean nothing more than fees as defined in section 66000, subdivision (b). But this view deprives the words “any” and “or other exactions” of all meaning. As we said in interpreting another statute within the Mitigation Fee Act, “[t]he use of the word ‘any’ and the inclusion of

300 several disjunctives to link essentially synonymous words all serve to broaden the applicability of the provision.” (Utility Cost Management v. Indian Wells Valley Water Dist. (2001) 26 Cal.4th 1185, 1191, italics added [referring to § 66022].) The words “any … other exactions” must have some meaning to broaden the statute's reach beyond merely a specific definition of fees. 57 Cal.4th at 1203.

After discussing two other cases that had interpreted this language: Fogarty v. City of Chico (2007) 148 Cal.App.4th 537 (holding that a restriction on number of units in a project was not an “other exaction”) and Williams Communications LLC v. City of Riverside (2003)114 Cal. App.4th 642 (holding that a license fee for installing fiber optic cable in the city streets was an “other exaction”), the Court stated its view that Fogarty and Williams had correctly interpreted the law, concluding with:

In combination, Williams and Fogarty indicate that the term “other exactions” under section 66020 at least includes actions that divest the developer of money or a possessory interest in property, but it does not include land use restrictions. This interpretation conforms to the statute's plain language far better than does Trinity Park's excessively narrow interpretation. Divesting the developer of money or a possessory interest is similar to imposing a fee, dedication, or reservation. This interpretation also conforms to the legislative purpose behind the statute. 57 Cal.4th at 1204.

Much of the oral argument in Sterling Park was devoted to debating fine points of real estate law, on the issue of whether when the city took an option to purchase an affordable unit (part of the city program to ensure continued affordability in the future), that constituted taking a possessory interest in real property.

The Court concluded that it did, and ended up with a prescient statement that could apply to the next case ̶ the San Jose case now awaiting argument:

It may be, as the City argues, that under traditional property law, an option to purchase creates no estate in the land. But a purchase option is a sufficiently strong interest in the property to require compensation if the government takes it in eminent domain. (County of San Diego v. Miller (1975) 13 Cal.3d 684, 691–693.) Compelling the developer to give the City a purchase option is an exaction under section 66020. Because of this conclusion, we need not decide whether forcing the developer to sell some units below market value, by itself, would constitute an exaction under section 66020. 57 Cal.4th at 1207 (emphasis added).

The Court may have taken the San Jose case in order to have a vehicle to decide this reserved issue as to whether a purely inclusionary requirement would be subject to the Mitigation Fee Act, since San Jose’s ordinance does not involve the city’s taking an

301 option on the property. If the Court decides that such a program, viewed as one that simply requires below market rate units to be built and sold, is indeed subject to the MFA, then the Court will effectively have rejected the pure police powers rationale for the program. Of course, there are a number of arguments against that position, including that price controls, rent control, mobile home vacancy restrictions, etc., have all been upheld in the past by the Court. Nevertheless, the possibility of a holding that even a program of purely inclusionary housing (with no in lieu fees, possessory interests or other complications) could be held to fall under the Mitigation Fee Act has many cities concerned and evaluating alternative approaches.

Are there other reasons to consider alternative approaches to straight inclusionary housing requirements?

Yes, and the most important such reason is to get around the Palmer case. This is a monkey wrench thrown into the affordable rental housing works by the Second District Court of Appeal in 2009. That decision, Palmer/Sixth Street Properties, L.P v. City of Los Angeles (2009) 175 Cal.App.4th 1396, invalidated a Los Angeles inclusionary housing requirement contained in a specific plan for an area of the city as applied to rental units on the basis that its pricing controls violated the Costa-Hawkins Act of 1995, Civ. Code Section 1954.50, et seq., which outlawed traditional rent control in new buildings in the state.

As a result of Palmer, cities with affordable housing ordinances for rental housing resorted to a variety of actions, including no action. For those which did not ignore the case, some have suspended their ordinances as applied to rental units. Others have bitten the bullet and instituted in lieu fees based on a nexus study (see below). In addition, under Costa-Hawkins, rent control can exist for a project where the builder receives either financial assistance or a Density Bonus Law (Govt. Code Section 65915) concession, and agrees by contract with the city to restrict rents.

Many housing advocates have pushed for a legislative solution; this case is widely viewed as a misapplication of the Costa-Hawkins Act to a situation it was never contemplated to address – thus crying out for a legislative overrule. A number of bills have been introduced to re-establish the legitimacy of affordable housing requirements for rentals. However, the most promising such bill, AB 1229, was vetoed by Governor Brown in October, 2013. In his veto message, he left little hope for an immediate resolution of this impasse:

As Mayor of Oakland, I saw how difficult it can be to attract development to low and middle income communities. Requiring developers to include below-market units in their projects can exacerbate these challenges, even while not meaningfully increasing the amount of affordable housing in a given community.

The California Supreme Court is now considering when a city may insist on inclusionary housing in new communities [the San Jose case]. I would

302 like the benefit of the Supreme Court’s thinking before we make adjustments in this area.

So what approaches may still be valid for inclusionary housing?

The next few sections of this paper will discuss several approaches that may continue to work for inclusionary ordinances. The question admits of a more sanguine response if we broaden it to include affordability requirements other than strict inclusion in new projects (e.g., in lieu fees). Here are some of the major ideas that may be considered:

• Justify inclusion under the police power (the San Jose case) • Do a nexus study and justify inclusion under the San Remo standard or the MFA • Convert the inclusionary requirement to a fee and justify it under the MFA • Do a nexus study and adopt a commercial linkage fee • Methods that are not directly tied to project impacts o Set up a Housing Trust Fund to provide subsidies o Set up an Infrastructure Financing District o Zone explicitly for a more affordable product o Use more development agreements o Conserve existing affordable stock (e.g., mobile homes)

Taking these in turn:

Justify inclusion under the police power

This is the traditional justification that was accepted by the Napa case and is being urged by the City of San Jose in front of the California Supreme Court. While the author of this paper is optimistic that this rationale will be accepted by the Court, any city attorney giving conservative advice to his or her city would probably suggest doing a nexus study to justify the ordinance.

Do a nexus study and justify inclusion under the San Remo standard or the MFA

A number of cities have embarked on nexus studies. The ones that this author has seen have all involved affordable housing fees (see below for further explanation of such nexus studies). But there seems to be no intrinsic reason why a nexus study could not be done for the inclusionary construction of the housing itself.

Such a requirement (without an in lieu fee component) would presumably, if not justified under the police power, have to satisfy either the standard of San Remo or the stricter standards of the MFA. The former derives from the case of San Remo Hotel L.L.P. v. City & County of San Francisco (2002) 27 Cal.4th 643. That case involved a takings challenge to a San Francisco ordinance requiring that a fee be paid to compensate for the conversion of residential units to transient occupancy units. This was a legislatively adopted fee, and the Court first rejected the argument that the standard of review should be the strict standard under Dolan v. City of Tigard (1994)

303 512 U.S. 374, Nollan v. California Coastal Commission (1987) 483 U.S. 825 and Ehrlich v. City of Culver City (1996) 12 Cal.4th 854. The Court then held, nonetheless, that “as a matter of both statutory and constitutional law” fees imposed for the purpose of mitigating development impacts “must bear a reasonable relationship, in both intended use and amount, to the deleterious public impact of the development.” 27 Cal.4th at 671. Having a nexus study meet this standard should not be difficult.

In addition to meeting the San Remo standard, compliance with the Mitigation Fee Act could be required if the Supreme Court ultimately decides the question it explicitly left open in the Sterling Park case: “whether forcing the developer to sell some units below market value, by itself, would constitute an exaction under [Govt. Code] section 66020.” If decided in the affirmative, then the Mitigation Fee Act would apply to such an inclusionary requirement. The appropriate approach now would seem to be to produce a nexus study that would comply with both the San Remo standard and the Mitigation Fee Act.

Complying with that Act will require a bit of creativity, since there are no public facilities being constructed under this approach. But since the Supreme Court will be the source of this requirement if they do decide the retained question in favor of the Act’s application to inclusionary housing requirements, one can hope that they will also give some guidance as to how compliance should be demonstrated.

Finally, while this approach could work with for-sale product, it still doesn’t get around the rental impasse created by Palmer. Since, as a practical matter, households below the moderate income level of 80 percent of area median income are normally renters, this approach probably wouldn’t do much for extremely low- and low-income households.

Convert the inclusionary requirement to a fee and justify it under the MFA

The most popular approach, at least in the Bay Area, seems to be to convert the inclusionary requirement into a straight fee to support affordable housing construction, instead of an in lieu fee. This fee can then be used by the city to subsidize the production of affordable units independent of the kind of project on which the fee is assessed. Furthermore, the city can presumably work around the Palmer case by using the money for either for-sale or rental units, since Palmer would not apply to a city- subsidized project (or where the city is a lender and negotiates terms of the loan to include affordability).

There are a number of economic firms producing these studies, including Keyser Marston Associates (KMA), Bay Area Economics (BAE), Economic and Planning Systems (EPS), David Paul Rosen & Associates (DRA), and others. The studies reviewed by this author tend to follow a similar pattern. For example a study designed to determine how many affordable units are needed to house new workers attributable directly and indirectly to the production of 100 rental market-rate apartments, might work as follows:

304 First, calculate the average market rental rate of the new units.

Second, calculate the household income needed to rent such a unit, using conventional guidelines, such as that rental housing costs should not exceed 30 percent of disposable income.

Third, deduct savings and taxes to calculate total disposable spending power per household.

Fourth, translate that spending power into job creation, determining how many jobs are created in each of various job categories, e.g., retail, health services, transportation, professional services, etc. For this purpose, some companies use a national model called IMPLAN, which takes local county census data as inputs.

Fifth, for the matrix of generated jobs, determine the income level of each net new worker.

Sixth, determine how many households will be formed by those new workers.

Seventh, calculate the average total income of such households, and thus categorize them by affordability criteria as extremely low-, very low-, low-, moderate-, or above moderate-income. This tells the city how many new units are needed for rentals in each of these categories for the new workers and their families.

Eighth, calculate an “affordability gap” for each category of housing. Essentially that is the subsidy needed per unit over and above the amount of the development cost that can be justified by the reduced rents that lower income households can afford to pay.

Ninth, the total of all such required subsidies is the total amount of funds needed to be collected from the developer to enable the appropriate number of affordable units to be constructed.

Tenth, translate that total dollar requirement into a fee per unit or per square foot. This is the maximum fee that can be charged.

Finally, set the level of the fee itself, typically at a level well below the maximum permissible. It is always advisable to have some slack in the fee, both because there may be mistakes and uncertainties in the analysis, and also because many cities believe that not all the cost of such units should be borne by the development community.

This process follows in general outline the methodology for Mitigation Fee Act nexus reports (often called AB 1600 studies) that have been used for years to justify development impact fees. This approach has generally been upheld by the courts. See, e.g., Garrick Development Co. v. Hayward Unified School District (1992) 3 Cal.App.4th 320 (school fees); Russ Building Partnership v. City and County of San Francisco (1987) 199 Cal.App.3d 1496 (transit impact fee on new office development).

305 It is assumed that this approach should be valid and defensible in State courts for affordable housing fees on residential development as well.

In the Bay Area, fees justified by this method recently have been set typically in the $15,000 to $20,000 range per rental unit.

Do a nexus study and adopt a commercial linkage fee

It is also possible to adopt a fee (typically assessed per building square foot) to help meet the need for affordable housing generated by commercial and industrial development, which predictably would generate additional workers, also needing housing. The general approach would be the same as outlined above, and conceptually would be similar to the justification for school impact fees, which are authorized by Govt. Code Section 65995 for both residential and nonresidential construction. The cities of Menlo Park, Oakland, and San Diego have such a fee, and one has been upheld by the Ninth Circuit. See Commercial Builders of Northern California v. City of Sacramento (Ninth Cir. 1991) 941 F.2d 872 (affordable housing fee on commercial development).

Methods that are not directly tied to project impacts

These approaches aren’t really related directly to tying the need for affordable housing to the impacts caused by new development, but I thought it would be useful to mention a few other ideas that have been surfaced to aid the production of affordable housing.

The first approach is to set up a Housing Trust Fund to provide subsidies to affordable project developers. This approach is being taken in San Francisco. It must rely on sources of funding other than in lieu fees, such as available excess Redevelopment funds, dedicated taxes or portions thereof, etc.

Another approach, also being tried in San Francisco, is to set up an infrastructure financing district for a particular planning area, and use dedicated property taxes or assessments to fund affordable housing.

Third, it is possible to use zoning laws directly to encourage affordable housing. An example followed by several cities is to require secondary dwelling units to be constructed in conjunction with market rate units. Some small cities in the Bay Area have satisfied their Housing Element mandate to provide sites for affordable dwellings by use of this method. It should also be possible to provide for an explicit mix of unit sizes in a project, including very small units that would, by design, end up being much more affordable than larger units.

Fourth, we have seen growth control measures that reserve a number of building permits (or give more “points” in a competition for a limited number of available building permits) to projects with affordable units.

306 Fifth, for large projects where developers may want the assurance of vested rights under a development agreement, negotiate affordable housing as one of the city benefits constituting partial consideration for entering into a development agreement.

Finally, and this is actually another required provision in Housing Elements (see Govt. Code Section 65583(c)(2)), cities can actively conserve existing affordable stock by such means as assisting in rehabilitation of older units and encouraging preservation of mobile home parks.

Does the recent U.S. Supreme Court decision in the Koontz case affect this analysis?

Like most forays of the U.S. Supreme Court into the area of land use regulation and takings jurisprudence, its recent decision in Koontz v. St. Johns River Water Management District (2013) ___U.S. ___, 133 S.Ct. 2586, will spur copious critical commentary and leave as many questions unanswered as answered. Undoubtedly, scholars will be kept busy for years trying to understand the limits of the holding. It may ultimately bear some relationship to inclusionary housing ordinances, but the precise delineation of any possible impact will have to await future judicial pronouncements.

Mr. Koontz wanted to develop 3.7 acres of his 15-acre property, most of which was wetlands. He offered to give the permitting authority a conservation easement over the rest of the land. The agency rejected that approach but was willing to grant the permit if he would agree to expend funds to improve an unrelated wetland owned by that agency many miles away from his property. He refused, and the permit was denied.

In a five to four decision penned by Justice Alito, the Court ruled in favor of Koontz, establishing two major principles regarding the strict scrutiny of Nollan and Dolan. First, it can apply when a permit is denied for failure of the applicant to accede to an invalid condition, not just when a permit is granted with an invalid condition. Second, it applies to demands for money, not just for dedications of property. The first principle was agreed to by all of the Justices, but the second was highly controversial, and brought forth a spirited dissent by Justice Kagan, joined by Justices Ginsburg, Breyer and Sotomayor.

The first point is truly new law, and will change California takings jurisprudence. It may also change the fundamental relationship between cities and developers as they negotiate permit conditions. The second point, however, is consistent with the decision reached by the California Supreme Court 17 years earlier in Ehrlich v. City of Culver City, supra.

The major point left unsettled by Koontz, however, and one that may have significant ramifications for inclusionary ordinances, is whether the “nexus” and “rough proportionality” requirements of Nollan/Dolan apply only to ad hoc, adjudicative decisions (as most courts have held, including in California), or whether they also can

307 be applied to legislative enactments imposing a fee of general applicability based on a set formula. The majority opinion in Koontz doesn’t give much indication that the Court intends to so extend the Nollan/Dolan doctrine, but in dissent, Justice Kagan warns of just such an eventuality:

Perhaps the Court means in the future to curb the intrusion into local affairs that its holding will accomplish; the Court claims, after all, that its opinion is intended to have only limited impact on localities’ land-use authority. [Citation omitted]. The majority might, for example, approve the rule, adopted in several States, that Nollan and Dolan apply only to permitting fees that are imposed ad hoc, and not to fees that are generally applicable. See, e.g., Ehrlich v. Culver City, 12 Cal. 4th 854, 50 Cal. Rptr. 2d 242, 911 P. 2d 429 (1996). Dolan itself suggested that limitation by underscoring that there “the city made an adjudicative decision to condition petitioner’s application for a building permit on an individual parcel,” instead of imposing an “essentially legislative determination[ ] classifying entire areas of the city.” 512 U. S., at 385, 114 S. Ct. 2309, 129 L. Ed. 2d 304. Maybe today’s majority accepts that distinction; or then again, maybe not. At the least, the majority’s refusal “to say more” about the scope of its new rule now casts a cloud on every decision by every local government to require a person seeking a permit to pay or spend money. 133 S.Ct. at 2608.

So, as to whether Nollan/Dolan scrutiny will be extended to legislatively imposed fees or exactions, at least four members of the current U.S. Supreme Court would vote no. As Justice Kagan notes, however, the existence of a fifth vote is unknown. If such scrutiny is extended to legislatively enacted fees, it would directly contradict the California Supreme Court’s holding to the contrary in Ehrlich. Fees or exactions adopted pursuant to a proper nexus study could meet that standard, however.

August 5, 2014 Andrew L. Faber Berliner Cohen 10 Almaden Blvd., Suite 1100 408 286-5800 [email protected]

308

Labor and Employment Litigation Update

Friday, September 5, 2014 General Session; 10:15 a.m. – 12:00 p.m.

Richard S. Whitmore, Liebert Cassidy Whitmore

309 Notes:______

310

Labor and Employment Update for the 2014 League of California Cities Conference

311 TABLE OF CONTENTS 9-14

OFFER OF EMPLOYMENT ...... 1

FAIR LABOR STANDARDS ACT ...... 2

WAGE AND HOUR ...... 4

FAIR EMPLOYMENT AND HOUSING ACT ...... 5

DISABILITY DISCRIMINATION ...... 9

FMLA ...... 13

PUBLIC RECORDS ...... 19

LABOR RELATIONS ...... 22

PUBLIC SAFETY ...... 32

DISCRIMINATION/HARASSMENT/RETALIATION ...... 33

FIRST AMENDMENT ...... 36

RETIREMENT ...... 38

WORKERS’ COMPENSATION ...... 40

LITIGATION ...... 42

SEVERANCE PAYMENTS ...... 46

312 OFFER OF EMPLOYMENT

Trial Court Should Have Allowed Individual Who Accepted Offer of State Employment and Took Action In Reliance on Offer to Sue for Promissory Estoppel After Position Was Eliminated. Joseph Piccinini applied for and was offered the position of deputy chief with the California Emergency Management Agency, a State agency. Piccinini informed the State that he could start work on February 1, 2011. He completed all of the necessary documentation for the position, underwent a physical examination, received a new uniform, signed a two-year lease for a home near the jobsite, and resigned from his position as chief of the Central Calaveras Fire Department. On February 3, he was told to report to work on February 7. However, on the evening of February 4, the State notified Piccinini that, due to budget constraints, his position had been eliminated.

Piccinini then filed suit against the State for wrongful termination, breach of contract, and promissory estoppel. The State demurred, and the trial court sustained the demurrer on the ground that public employment is governed by statute, not contract. To the extent Piccinini premised his claims on misrepresentations by the State that the deputy chief position was available, the trial court reasoned that the State was immune from suit. When Piccinini failed to amend his complaint, the court dismissed the case. Piccinini appealed, and the Court of Appeal reversed in part and affirmed in part.

Government Code section 19257 provides that any person who in good faith accepts employment contrary to the State civil service laws shall be paid any promised compensation or, if no compensation was promised, shall receive the actual value of any services rendered and expenses incurred in good faith, and shall have a claim against the appointing power. Government Code section 18500 provides that civil service tenure is subject to the appropriation of sufficient funds.

Piccinini alleged in his complaint that he accepted in good faith employment that was contrary to law (i.e., lacking sufficient funds). The Court of Appeal held that Piccinini’s allegations fell squarely within the scope of Section 19257, and he should be allowed to proceed on a promissory estoppel cause of action as authorized by Section 19257. Promissory estoppel is an equitable theory of recovery. If a party makes a promise that one would reasonably expect to induce action, and the promise does in fact induce action to the detriment of the promisee, a court may enforce the promise or determine another remedy to avoid injustice.

The Attorney General argued that allowing Piccinini’s promissory estoppel theory would contravene important state public policies. As a general matter, estoppel will not be applied against the government if doing so would nullify a rule of policy adopted for the public benefit or would expand the statutory or constitutional power of a government officer or employee. However, the Court held that the general rules against estoppel did not apply in this case,

because Section 19257 expresses a legislative policy in favor of allowing someone who has accepted an offer of state employment in good faith to assert a cause of action.

The Court of Appeal also held, however, that the trial court properly sustained the State’s demurrer to the breach of contract and wrongful termination claims. Piccinini could not claim breach of contract when public employment is governed by statute, not contract. Further, he could not allege wrongful termination when the offer of employment was revoked solely due to lack of funding.

Thus, the Court of Appeal reversed the court’s dismissal of Piccinini’s promissory estoppel claim and gave Piccinini 30 days to file an amended complaint.

Piccinini v. California Emergency Management Agency (2014) __ Cal.App.4th __ [2014 WL 2443867].

FAIR LABOR STANDARDS ACT

Court Holds That Dispatchers and Aeromedical Technicians Are Not Employees Engaged in Fire Suppression for Purposes of Calculating Overtime Pay. The City of Los Angeles Fire Department (LAFD) employs dispatchers and aeromedical technicians. Dispatchers, who work from the Los Angeles City Hall building, receive emergency calls and relay them to the fire stations. While dispatchers occasionally work at the scene of a large incident, no dispatcher has done this for at least ten years. Dispatchers are not required to keep fire protective gear with them or to handle firefighting equipment. They do not physically engage in fire or rescue operations. Before becoming a dispatcher for the LAFD, dispatchers are required to work for the LAFD as either a firefighter or paramedic for at least four years.

Aeromedical technicians must have experience as both firefighters and paramedics. They work within the Air Operations Unit (AOU), providing support services for helicopters designated as air ambulances. They are not outfitted with the same gear used by firefighters, and spend the majority of their flights administering medical care. While the AOU helicopters are occasionally used to drop water on brush fires and map out the fires, aeromedical technicians do not ride in the helicopter when it drops water on the fires.

For purposes of the Fair Labor Standards Act (FLSA), the City classified dispatchers and aeromedical technicians as employees “engaged in fire protection.” Therefore, instead of providing overtime pay for any hours worked over 40 in one week, the City used the calculation provided in 29 U.S.C. section 207(k) (the 207(k) calculation), and only provided overtime pay if the dispatchers or aeromedical technicians worked more than 204 hours in a 27-day period.

A group of dispatchers and aeromedical technicians (Plaintiffs) filed suit alleging that the City violated the FLSA by calculating their overtime pay as though they were employees “engaged in fire protection.” Both parties filed motions for summary judgment, and the district court granted Plaintiffs’ motion. Following the district court’s order, the parties began to calculate damages, and reached an impasse. They filed motions for summary judgment on the issue of damages, and the district court granted Plaintiffs’ motion. The City appealed the issues of liability and damages.

The FLSA is construed liberally in favor of employees, and exemptions are narrowly construed against employers. Section 203(y) of the FLSA defines “employee engaged in fire protection” as an employee who, among other factors, “has the legal authority and responsibility to engage in fire suppression.” In a previous case involving the LAFD, Cleveland v. City of Los Angeles (9th Cir. 2005) 420 F.3d 981, the Court of Appeals for the Ninth Circuit evaluated whether paramedics qualified as employees “engaged in fire suppression,” and held that they were not. In its analysis, the Court noted that while paramedics treat injured people and exhausted firefighters, they do not assist with fire suppression. They do not, for instance, carry firefighting equipment or wear fire-protective gear.

Applying the same reasoning as in Cleveland, the Court held that dispatchers and aeromedical technicians do not engage in fire suppression. Dispatchers do not suppress fires; they send firefighters to the scene to suppress fires. Aeromedical technicians perform medical duties and are not required to wear full fire protective gear. If an air ambulance is used to drop water, the technicians may perform support duties for the helicopter, but do not ride in the helicopter when it performs the drop. Therefore, Plaintiffs’ overtime should not have been calculated using the calculation for employees engaged in fire suppression.

The Court then addressed the issue of whether the City’s overtime calculation was “willful.”

While the standard statute of limitations for FLSA violations is two years, the FLSA allows a three-year statute of limitations for “willful” violations. An employer acts willfully when it knows of a risk that its conduct is unlawful and disregards that risk.

The Court held that the City acted willfully because it has extensively litigated the meaning of the section 207(k) calculation (for instance, in Cleveland), and failed to examine the issue of whether the calculation should be used for dispatchers and aeromedical technicians. Further, during the course of litigating this case, the City reassigned dispatchers from the Bureau of Support Services, which has a primary objective of dispatching resources to the scene of emergencies, to the Bureau of Emergency Services, which includes all personnel normally engaged in firefighting. Therefore, the City acted willfully and is liable for an additional year of withheld overtime pay. The Court also held that Plaintiffs were entitled to liquidated damages in the amount of the unpaid overtime compensation (i.e., double damages) because the facts that supported a showing of willfulness also supported a finding that the City did not act in good faith and did not have objectively reasonable grounds for believing that it was complying with the FLSA.

An employer may credit overtime payments already made to employees against the overtime payments owed to them under the FLSA. The parties disputed how to calculate the credits and offsets. While some other federal circuits use a cumulative approach, the district court held that they should be calculated on a week-by-week basis, and the Court agreed. Because overtime is supposed to be calculated on a weekly basis (any work over 40 hours), the Court reasoned that the credits should be calculated using the same time frame.

Haro v. City of Los Angeles (9th Cir. 2014) __ F.3d __ [2014 WL 1013244].

WAGE AND HOUR

Favorable Decision for Employers Reinforces Importance of Clear Policies Regarding Off-the- Clock Work. Three Outpatient Pharmacy Managers (‘OPM”) attempted to bring a class action against their employer, Kaiser Foundation Health Plan, Inc., alleging, among other things, failure to pay overtime compensation for hours worked off-the-clock. Prior to November 2009, all OPMs were classified as salaried employees, exempt from various wage and hour provisions. Following a settlement of a previous class action against Kaiser alleging that OPMs had been misclassified as exempt, they were reclassified as non-exempt hourly employees entitling them to overtime compensation. An OPM named Jong and two others then filed a class action complaint alleging that, at the time of the reclassification, Kaiser “instituted a policy that forbade the payment of overtime premium to OPMs, while simultaneously refusing to make any adjustments to the duties and responsibilities of the class.”

Kaiser moved for summary judgment as to the three named plaintiffs. The trial court granted the motion as to Jong only and he appealed the ruling. The Court of Appeal upheld the trial court’s order on the ground that Jong had failed to present sufficient evidence from which the Court could conclude Kaiser had “knowledge” of Jong’s alleged unreported off-the-clock work.

The Court based its ruling on critical admissions by Jong, including that: 1. He knew of Kaiser’s written policy that OPMs should be clocked in whenever they were working; 2. He was always paid for time he recorded on Kaiser’s recording system, including overtime hours; 3. He was specifically instructed he was eligible to work and be paid for overtime hours; 4. No manager or supervisor ever told him that he should perform work off-the-clock; 5. There was never any occasion when he requested approval to work overtime that was denied; 6. He was paid for all work hours he recorded, including overtime hours, even when he did not seek pre-approval for the overtime work; and

7. He signed an attestation form agreeing not to perform work off-the-clock in accordance with Kaiser policy.

In opposition to Kaiser’s summary judgment motion, Jong presented testimony from 18 OPM depositions from the prior misclassification lawsuit in an effort to establish that employees in the OPM position routinely worked 48 hours per week. In rejecting Jong’s argument, the Court determined not only that this was inadmissible evidence but also that it did not constitute evidence Kaiser had knowledge Jong (as opposed to OPMs generally and prior to the reclassification) was performing work off-the-clock.

The Court also rejected Jong’s claim that alarm code data from his pharmacy cross-referenced with his time records revealed that he had disarmed the alarm prior to the time he recorded beginning to work. Jong argued that Kaiser could have compared the alarm records to his time keeping records and discovered that he was performing work off-the-clock prior to the start of his shifts. The Court rejected this argument, suggesting that the standard for constructive knowledge is not whether the employer “could have known” that off-the-clock work was being performed, but rather whether the employer “should” have known about it. The Court also held that, even if Kaiser had viewed the alarm records, those records merely showed that Jong was in the pharmacy before clocking in, not that he was performing any work during those gaps. Therefore, the Court of Appeal affirmed the trial court’s grant of summary judgment in favor of Kaiser.

Jong v. Kaiser Foundation Health Plan, Inc. (2014) 171 Cal.Rptr.3d 874.

FAIR EMPLOYMENT AND HOUSING ACT

Paid Intern Offered Sufficient Evidence To Proceed To Trial On Claim That His Male Supervisor Sexually Harassed Him. Brian Lewis, a heterosexual male, worked at the City of Benicia’s water treatment plant as a volunteer (beginning in March 2008), as a paid intern for a 60-day internship (from July to October 2008), and again as a volunteer (from January to May 2009). Lewis sued the City and two former supervisors, Steve Hickman and Rick Lantrip, under the Fair Employment and Housing Act (FEHA) for sexual harassment and failure to prevent harassment, and asserted a retaliation cause of action against the City. He also brought a claim for intentional infliction of emotional distress.

The superior court granted Hickman and Lantrip’s motion for summary judgment and the City’s motion for judgment on the pleadings as to all claims except for the retaliation claim, which proceeded to trial. The jury returned a special verdict in which it found in favor of the City. Lewis appealed the judgment in favor of the City, as well as the court’s grant of Hickman and

Lantrip’s motion for summary judgment. The Court of Appeal affirmed in part and reversed in part.

Under FEHA, an employee who harasses another employee may be held personally liable. In order to prove sexual harassment in the form of a hostile work environment, an employee must show (1) he was subjected to unwelcome sexual advances, conduct, or comments; (2) the harassment was based on sex; and (3) the harassment was sufficiently severe or pervasive to alter the conditions of employment and create an abusive working environment. Sexual harassment can occur between members of the same gender so long as the plaintiff can establish that the harassment amounted to discrimination because of sex. This may include evidence that the harasser engaged in sexual comments and propositions and was motivated by a sexual interest.

The Court of Appeal held that the trial court should not have granted Hickman’s motion for summary judgment because Lewis presented sufficient evidence to create a triable issue of fact regarding whether Hickman, Lewis’s supervisor during his first volunteer period and most of his paid internship, harassed Lewis because of his sex. The Court determined that Lewis alleged sufficient conduct to allow an inference that Hickman was pursuing a romantic or sexual relationship with him. For instance, Lewis alleged that Hickman gave him numerous gifts, including underwear, and frequently bought lunch for Lewis. Hickman also allegedly showed Lewis pornographic images on his computer, told Lewis risqué jokes, and once said that Lewis should visit his home, and asked Lewis “[W]hy don’t you kiss me[?].”

The Court also held that Lewis created an issue of material fact as to whether Hickman’s conduct was sufficiently severe or pervasive enough to alter Lewis’s working conditions. Courts must evaluate the working environment in light of the totality of the circumstances, including the frequency and severity of the conduct. Lewis alleged conduct that occurred over a period of several months and that included numerous gifts, sexual jokes, and pornographic images. While Hickman may ultimately prove that he did not sexually harass Lewis, the Court of Appeal held that Lewis raised triable issues of fact and therefore the trial court erred by granting Hickman’s motion for summary judgment.

The Court held, however, that the trial court correctly granted summary judgment in favor of Lantrip, Lewis’s supervisor for the last few weeks of his paid internship and his second volunteer period. Lewis alleged that Lantrip displayed pornographic images on the work computer belonging to a secretary and showed them to everyone “in the general vicinity.” Lantrip also told obscene jokes and frequently massaged the shoulders of the secretary in the presence of other employees. The Court held that this was insufficient to raise a triable issue of fact as to whether Lantrip sexually harassed Lewis under any sexual harassment theory. There was no evidence that Lantrip pursued a sexual relationship with Lewis or was motivated by any sexual interest, nor was there evidence that Lantrip attacked Lewis’s sexual identity as a heterosexual male. Lantrip’s touching of the secretary was insufficient to raise an inference that Lantrip was engaging in widespread sexual favoritism. Thus, the Court of Appeal affirmed the superior court’s grant of Lantrip’s motion for summary judgment.

When the trial court originally found that Hickman and Lantrip did not sexually harass Lewis, it found that the City could not be liable for sexual harassment or failure to prevent harassment and granted its motion for judgment on the pleadings. When the Court of Appeal reversed summary judgment in favor of Hickman, the possibility of liability for the City was renewed, and the Court of Appeal therefore reversed the grant of judgment on the pleadings for the causes of action against the City for sexual harassment and failure to prevent harassment.

The Court then addressed Lewis’s retaliation claim. In order to prove retaliation, the employee must show that (1) he engaged in protected activity, (2) the employer took adverse action, (3) the protected activity was a motivating reason for the adverse action, and (4) the employer’s conduct caused harm to the employee. The jury found that Lewis proved the first three factors, but that the City’s conduct was not a substantial factor in causing harm to Lewis.

Lewis argued, and the Court of Appeal agreed, that the superior court should have allowed Lewis to present evidence of Hickman’s sexually harassing conduct. The superior court excluded the evidence on the basis that the sexual harassment claims were no longer at issue, and therefore the evidence was irrelevant and unduly prejudicial. While the court had broad discretion to limit the scope of the harassment evidence, it was abuse of that discretion to exclude all of the evidence. Evidence of the sexual harassing conduct was relevant to all of the retaliation elements. For instance, if Lewis’s workplace complaint concerned only minor or innocuous conduct, it is less likely that the City would be motived to retaliate against him. Similarly, if the alleged retaliatory acts were part of a larger course of harassing conduct, it is more likely that the retaliation would have caused Lewis to suffer emotional distress. Therefore, Lewis should have been able to offer at least some evidence of Hickman’s conduct.

The Court of Appeal rejected Lewis’s request for a limited retrial on the causation-of-harm element. A court may not enter a partial special verdict that fails to dispose of all of the elements of a single cause of action, and it would cause confusion and uncertainty to ask a jury to determine one element of a cause of action. Therefore, a full retrial on the retaliation claim is necessary.

Lewis v. City of Benicia (2014) __ Cal.App.4th __ [2014 WL 1232694].

Employment Application Requiring All Lawsuits to be Filed Within Six Months Should Not Have Barred Lawsuit Brought Under FEHA.

Ashley Ellis began working for U.S. Security Associates as a security guard in September 2009. In early 2010, Ellis’s direct supervisor was Rick Haynes. Haynes also supervised his wife. Haynes called Ellis and proposed that she join him and his wife in sexual activities. Ellis rejected the proposition. Later that day, Haynes texted Ellis at work and told her that he was sorry she did not want to be lovers.

Thereafter, Haynes subjected Ellis to a pattern of offensive and unwanted sexual behavior, including making suggestive sexual remarks to her, telling her about his sexual activities, and

asking her to join he and his wife in sexual activities. Multiple female employees complained to management that Haynes was sexually harassing them and Haynes was sent to training, but the harassment continued. Ellis notified the company’s headquarters in November 2010, and Haynes was terminated in December 2010.

Ellis filed a complaint with the Department of Fair Employment and Housing (“DFEH”) and subsequently filed a complaint against U.S. Security and Haynes for, among other things, discrimination, harassment, failure to maintain an environment free from harassment, and retaliation under the Fair Employment and Housing Act (“FEHA”). In response, U.S. Security filed a motion for judgment on the pleadings based on the fact that Ellis signed an employment application that contained the following language:

“I understand, agree and acknowledge that any claim or lawsuit relating to my service with [U.S. Security] must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit. I waive any statute of limitations to the contrary.”

Ellis argued the contract provision in the application was unenforceable as a matter of law. The trial court granted U.S. Security’s motion for judgment on the pleadings and the matter was dismissed. Ellis appealed.

The Court of Appeal held that the six months limitation provision in the application for employment was not enforceable, unreasonable, and against public policy. The Court noted that it is the public policy of FEHA to “protect and safeguard” the rights of employees against discrimination, and to provide effective remedies that will eliminate discriminatory practices. In order to bring a claim under FEHA, an employee must file an administrative claim with the DFEH, and has one year from the date of the unlawful act to do so. Once the employee receives a right-to-sue letter from the DFEH, he or she has one year to file suit.

In some circumstances, parties may agree to shorten a statute of limitations period so long as the shortened period is reasonable, i.e., gives sufficient time to effectively pursue a judicial remedy. However, courts generally only recognize shortened limitations periods in the context of straightforward transactions, such as a breach of contract, where the triggering event for the statute of limitations is immediate and obvious. They are not generally recognized in employment discrimination claims.

The Court analyzed the public policies underlying FEHA, and held that a six-month limitations period violated the policies and was too short. The current FEHA statute of limitations provides an effective remedy for vindicating the rights of employees, and the provision in Ellis’s employment application seriously truncated that period of time. The shortened period of time also thwarts a critical aspect of FEHA- administrative enforcement. Filing charges with the DFEH is the only remedy for some employees, and a six-month statute of limitations would require Ellis to file suit before the DFEH had an opportunity to meaningfully participate by, for instance, conducting an investigation. It could also force an employee to file suit before she

exhausted her administrative remedies, which is a jurisdictional prerequisite to filing suit. Thus, the Court of Appeal reversed the grant of judgment on the pleadings in favor of U.S. Security.

Ellis v. U.S. Security Associates (2014) __ Cal.App.4th __ [2014 WL 1229038].

DISABILITY DISCRIMINATION

Disability Discrimination Case Should Have Survived Summary Judgment When EEOC Presented Evidence That Employee’s Physical Presence at Worksite Was Not Essential Function of Her Job. Ford Motor Company hired Jane Harris in 2003 as a resale buyer. Resale buyers act as intermediaries between steel suppliers and companies that use steel to produce parts for Ford. When problems arise, resale buyers engage in group problem-solving, and must be available to interact with members of the resale team, buyers, and others in the Ford system. Ford managers made the business judgment that such meetings are most effectively handled face to face.

Harris was consistently rated as “excellent plus” in her annual performance evaluations, but also received the lowest “contribution assessment” in 2007 and 2008, which placed her in the bottom quartile of employees in her peer group.

Harris suffered from Irritable Bowel Syndrome (IBS), and on particularly bad days could not drive herself to work or stand up from her desk without soiling herself. She began taking intermittent FMLA leave when she experienced severe IBS symptoms, and her absences began to affect her job performance. Harris’s supervisor allowed her to work on a flex-time telecommuting schedule on a trial basis in 2005. However, the trial was unsuccessful because Harris did not establish regular and consistent work hours. After that, Harris worked from home on an informal basis on nights and weekends so that she could keep up with her work, but Ford did not approve the remote work or credit Harris with the time spent working during non-“core” hours. When Harris worked nights and weekends, she made mistakes and missed deadlines because she was unable to get in touch with suppliers. When Harris stayed home because of her illness, Ford marked her absent. During the first seven months of 2009, Harris was absent more often than she was present during core business hours.

In February 2009, Harris requested a disability accommodation: permission to telecommute as needed. Ford has a telecommuting policy that allows some employees to telecommute up to four days a week, though it notes the arrangement is not appropriate for all jobs or employees. Harris met with her supervisor and human resources to discuss the request. She maintained that most of her work could be done via computer or telephone. Harris’s supervisor expressed a concern about Harris being able to meet with suppliers, to which Harris responded that she could always reschedule meetings that fell at inconvenient times. Ford denied Harris’s request.

However, a personnel relations representative suggested alternative accommodations, including moving Harris’s cubicle closer to the restroom or finding another job at Ford more suitable for telecommuting. Harris rejected both options.

Harris filed a disability discrimination charge with the Equal Employment Opportunity Commission (EEOC). Approximately three months later, Harris was rated as a “low achiever” and placed on a Performance Enhancement Plan (PEP). At the conclusion of the 30-day PEP period, Harris had not met any of the identified objectives. Ford terminated her employment.

The EEOC filed suit against Ford, alleging that Ford violated the Americans with Disabilities Act (ADA) by failing to accommodate Harris’s disability and retaliating against her for filing an EEOC charge. Ford filed a motion for summary judgment as to both claims, which the district court granted. The EEOC appealed, and the Court of Appeals for the Sixth Circuit reversed.

An employer discriminates in violation of the ADA if it does not make reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability (whether an employee or an applicant), unless the employer can demonstrate that the accommodation would impose an undue hardship on the business’s operations.

The plaintiff has the burden of proving she is “otherwise qualified” despite her disability (1) without an accommodation, (2) with an “alleged essential” job requirement eliminated, or (3) with a proposed reasonable accommodation.

The Court of Appeals held that the EEOC presented evidence to establish that Harris was qualified for the position as long as the requirement that she be physically present at Ford facilities was eliminated. The EEOC presented evidence that Harris earned consistently positive performance reviews, and that Ford’s only serious criticism related to her frequent IBS-related absences. Absent the attendance issues, Harris had the qualifications necessary to be a resale buyer. Thus, the burden switched to Ford to prove that physical presence at Ford facilities is an essential function of the resale buyer position. While predictable and regular attendance in the workplace is an essential requirement of most jobs, technology has advanced such that attendance at the workplace is no longer synonymous with attendance at the employer’s physical location. The law must recognize that a “workplace” is anywhere that an employee can perform her duties. Thus, the Court stated that Ford had to demonstrate that Harris’s physical presence at the Ford facilities was essential.

Ford presented evidence that teamwork was integral to the resale buyer position and that one of Harris’s coworkers believed she (the coworker) could not perform effectively as a resale buyer if she telecommuted. In Ford’s business judgment, Harris’s physical presence was an essential function of her position. The Court of Appeals acknowledged this, but noted that Ford allowed other resale buyers to telecommute (albeit on a more limited basis), and that the majority of Harris’s communications were done via conference call even when she was physically present at Ford facilities. Thus, although Ford presented “significant evidence” that physical attendance

was an essential function of the resale buyer position, the EEOC offered enough evidence to dispute this conclusion.

Alternatively, the Court of Appeals held that the EEOC provided sufficient evidence that Harris was qualified for the resale buyer position with a reasonable accommodation of a telecommuting arrangement. While Harris’s 2005 flex-time arrangement was unsuccessful, flex-time scheduling is different than telecommuting. An employer can rely on a telecommuting employee to work during scheduled hours.

Ford argued that Harris’s requests to telecommute up to four days a week was unreasonable. The Court of Appeals stated that if Ford thought the request was unreasonable, it should have engaged in the interactive process to identify reasonable alternatives. Further, it could not use Harris’s past attendance issues as the basis for denying her requested accommodation because the EEOC presented evidence that her attendance issues were related to her IBS flare-ups. Finally, the Court rejected Ford’s argument that Harris was not “otherwise qualified” because she rejected Ford’s alternative reasonable accommodations. Moving Harris’s cubicle closer to the restroom was not reasonable in light of the nature of Harris’s disability (i.e., if she could soil herself by standing up, she could not walk all the way to the restroom). Reassignment to another position should only be considered if accommodation within the employee’s current position would pose an undue hardship, and telecommuting provided a reasonable accommodation.

Therefore, because the EEOC provided evidence that Harris was qualified for the resale buyer position with a reasonable accommodation, the burden shifted to Ford to prove that the accommodation posed an undue burden. While setting up a telecommuting workstation would entail some cost to the company, Ford’s telecommuting policy states that it will absorb the cost for employees who have been approved to telecommute. Therefore, Ford failed to meet its burden and the EEOC created a triable issue of fact regarding whether Harris could perform all of her duties from a remote location.

The Court then addressed Harris’s retaliation claim. A plaintiff must show that she engaged in protected activity, she suffered an adverse employment action, and there was a causal connection between the two. The EEOC presented evidence in the form of temporal proximity: four months after Harris filed an EEOC charge, she was terminated. While the time period was not short enough to establish causation on its own, the EEOC also presented evidence that after Harris filed her complaint, her superior began conducting intimidating one-on-one meetings, held a meeting with all of Harris’s coworkers to discuss her attendance problems, and gave her negative performance reviews for the first time.

To rebut this, Ford presented evidence that Harris was consistently rated in the bottom quartile of her peer group, struggled with several of the job duties including interpersonal relations, and failed to meet the objectives of her PEP. Thus, the burden shifted back to Harris to show that Ford’s justifications were false. The EEOC argued that Harris’s job issues only prompted a negative review after she filed her complaint, thus demonstrating that Ford’s reasons for terminating Harris’s employment were pretextual. Therefore, the EEOC created a material issue

of fact regarding Ford’s motivation, and the district court erred when it granted Ford’s motion for summary judgment. The Court of Appeals reversed the district court’s grant of summary judgment and remanded the case for further proceedings.

E.E.O.C. v. Ford Motor Co. (6th Cir. 2014) __F.3d__ [2014 WL 1584674].

Corporation Did Not Violate ADA By Terminating Employment of Commercial Truck Driver for Alcoholism Sakari Jarvela worked as a commercial truck driver for Crete Carrier Corporation from November 2003 until April 2010. At some point, Jarvela developed a problem with alcohol abuse. He sought treatment in March 2010. Jarvela’s physician diagnosed him as suffering with alcoholism and referred him to an outpatient treatment program. Jarvela requested leave under the Family Medical Leave Act (FMLA), which Crete approved. Jarvela completed his treatment program in April 2010 and immediately sought to return to work, only one and a half months after being diagnosed with alcoholism. Crete maintains a company policy that prohibits it from employing anyone who has had a diagnosis of alcoholism within the past five years. The Department of Transportation (DOT) regulations prohibit anyone with a currently clinical diagnosis of alcoholism from driving commercial trucks. Thus, Ray Coulter, Crete’s vice president for safety, determined that Jarvela no longer met the qualifications to be a commercial truck driver for Crete, and terminated his employment.

Jarvela filed suit against Crete alleging that it discriminated against him on the basis of his disability – alcoholism – in violation of the ADA, and that it interfered with his FMLA rights and retaliated against him. The district court granted Crete’s motion for summary judgment, and Jarvela appealed. The Court of Appeals for the Eleventh Circuit affirmed.

In order to state a claim under the ADA, an employee must show that he is disabled, he is a qualified individual, and he suffered unlawful discrimination because of his disability. A qualified individual is one who satisfies the requisite skill, education, experience, and other job- related requirements of his employment position and can perform the essential functions with or without a reasonable accommodation.

The job description for Jarvela’s position stated that an essential duty is that the employee qualifies as a commercial driver pursuant to both DOT regulations and Crete company policies. Under the DOT regulations, a person is not qualified to drive a commercial motor vehicle if he has a current clinical diagnosis of alcoholism. The Court of Appeals interpreted the phrase “current clinical diagnosis” to mean an individual who suffers from alcohol dependency. However, the Court of Appeals noted that the DOT regulations do not address who makes the final determination of whether an employee has a current clinical diagnosis of alcoholism – the employer or the medical provider.

Jarvela argued that only a DOT medical examiner could determine whether he had a current clinical diagnosis of alcoholism. Jarvela further argued that the medical examiner found he did

not suffer from a current clinical diagnosis of alcoholism because the examiner issued him a six- month medical certificate. Because an examiner is only supposed to issue this certificate if the individual is medically qualified to drive, Jarvela argued that the examiner implicitly found that he did not suffer from a current clinical diagnosis of alcoholism.

Crete argued that the DOT regulations place the burden on an employer to ensure that an employee meets all qualification standards. Because the regulations place the onus on the employer to make sure that each employee is qualified to drive a commercial vehicle, the employer must determine whether someone suffers from a clinical diagnosis of alcoholism. Crete determined that Jarvela had a current clinical diagnosis of alcoholism. Neither the district court nor the Court of Appeals found any fault with this determination. Therefore, the district court correctly found that Crete did not violate the ADA.

In order to state a claim for FMLA interference, the employee only needs to demonstrate that he was entitled to a benefit that the employer denied. An employee has a right to be restored to his position of employment, or an equivalent position, following FMLA leave. However, an employer can deny reinstatement if it can demonstrate that it would have discharged the employee even if he had not been on FMLA leave. Here, Crete provided evidence that it would have discharged Jarvela regardless of his FMLA leave due to his diagnosis of alcohol dependence, and Jarvela failed to present any evidence disputing it. Therefore, Jarvela’s interference claim failed.

Jarvela’s retaliation claim similarly failed. According to Coulter, who terminated Jarvela’s employment, he played no part in approving Jarvela’s FMLA request and did not know Jarvela was on FMLA leave. Jarvela presented no evidence to rebut Coulter’s testimony. Jarvela bore the burden of proving knowledge, and failed to do so. Thus, the Court of Appeals affirmed the district court’s grant of summary judgment in Crete’s favor.

Jarvela v. Crete Carrier Corp. (11th Cir. 2014) __ F.3d __ [2014 WL 2750112].

FMLA

Defendants Entitled to Judgment as a Matter of Law When Employee Failed to Present Evidence That He Was Requesting Leave for a Period of Incapacity. Patrick Hurley began working for Kent Naples, Inc. (Kent) in 2001. At some point around 2008, Hurley sent an email to the Chief Executive Officer of Kent’s parent company and attached his vacation schedule, which listed eleven weeks of vacation over the next two years. When the CEO responded that Hurley’s vacation request was denied, Hurley stated that it was a vacation schedule, not a request, and that he had “been advised by medical/health professionals” that he needed to avail himself of vacation time. Hurley did not mention in the email that he suffered from depression and anxiety that produced panic attacks.

The CEO met with Hurley the next day, and the parties dispute whether Hurley mentioned his medical condition during the meeting. It is undisputed that the CEO terminated Hurley’s employment. According to the CEO, Hurley was terminated for insubordination and poor performance.

Hurley filed suit against Kent, its parent company, and the CEO alleging causes of action for interference with the exercise of his Family and Medical Leave Act (FMLA) rights and retaliation for exercising his right to leave. The case proceeded to trial. At the close of Hurley’s case, Defendants moved for judgment as a matter of law, arguing that while Hurley had a chronic serious health condition, there was no evidence that he requested leave for a period of incapacity. The district court denied the motion, and trial proceeded. The jury found that Hurley’s leave request was not a motivating factor in Defendants’ decision to terminate his employment, but then awarded damages to Hurley for the harm caused by the termination. Defendants renewed their motion for judgment as a matter of law, and moved for a new trial in light of the inconsistent verdict. The district court denied both, and Defendants appealed. The Court of Appeals for the Eleventh Circuit reversed.

The FMLA allows an eligible employee to take up to 12 workweeks of unpaid leave annually for, among other reasons, “a serious health condition that makes the employee unable to perform the functions of the position of such employee.” In order to succeed on a claim for interference with, or retaliation for, the exercise of FMLA rights, the employee must prove that he qualified for FMLA leave.

Hurley argued that an employee only needs to “potentially qualify” for leave in order to bring a claim for FMLA interference. The Court of Appeals disagreed, stating that the FMLA makes no mention of “potential rights.” In addition, the Court held that notice of leave is only relevant to an FMLA claim if the noticed leave is protected by the FMLA. Giving an employer notice of unqualified leave does not trigger FMLA protections.

Hurley also argued in the district court that his leave should have been granted because he had a “chronic condition” and his requested leave would have been beneficial. While one type of “serious health condition” that qualifies for FMLA leave is a chronic condition, the FMLA does not extend its protections to any leave that may be medically beneficial to an employee’s chronic health condition. The employee may only take protected leave for a period of incapacity or treatment for such incapacity. Hurley admitted that his leave was not for a period of incapacity or for treatment for such incapacity. Therefore, Hurley failed to meet his burden of proving that his leave request qualified for FMLA protection.

The district court erred by denying Defendants’ motion for judgment as a matter of law as to Hurley’s interference and retaliation claims. The Court of Appeals remanded with instructions for the district court to enter judgment in Defendants’ favor on all claims. Because this decision disposed of all claims, the Court of Appeals did not address the jury’s potentially inconsistent findings.

Hurley v. Kent of Naples, Inc. (11th Cir. 2014) __ F.3d __ [2014 WL 1088293].

County Did Not Violate the FMLA By Ordering Peace Officer to Submit to Fitness for Duty Examination After Reinstating Her to Employment Following FMLA Leave. White is employed with the Los Angeles County District Attorney’s Office (DA) as a Senior District Attorney Investigator. The position requires peace officer status under Government Code section 1031, and the essential functions of the position include personally serving arrest warrants, making arrests, interrogating suspects, and booking prisoners.

White’s brother-in-law died in late 2009. Around that time, White began experiencing emotional difficulties, and displayed erratic behavior in the workplace. In April 2010, White was part of a team of investigators executing a search warrant. White was guarding the perimeter of the location when, without warning to her team members, she jumped over a wrought iron fence and said, “Who’s coming with me?” Her actions jeopardized her safety by placing her in a position of potential cross fire from team members. Other investigators believed White may have psychological issues affecting her stability. White’s former supervisor informed White’s current supervisor, Terisa Carver, that White had recently stated she was having problems regulating her medication.

In April 2010, White asked for the afternoon off because she said her medication was making her “feel stupid.”

In May 2010, White was observed crying, anxious, and experiencing mood swings.

In June 2010, White attended a tactical training, where she appeared nervous, made poor tactical decisions, tripped over a fellow investigator, and pointed her fake weapon at team members. The next day, White was instructed to wait off-site while two investigators contacted a suspect. Instead of waiting, White drove down the street at a high rate of speed with the vehicle’s siren blaring and parked in the middle of the street so that she could provide back-up to the other investigators. When questioned about the incident, White said she went to back-up the officers because she had seen them with their guns drawn, a fact that the officers “emphatically denied.”

In July 2010, when White was talking to Carver, she described herself as a “whack job.”

In February 2011, White met with Carver and began crying, saying she was worried her father was going to purchase a gun and kill himself and White’s mother. When Carver asked White about the situation the following week, White looked confused and downplayed it. That same month, White was required to testify in a criminal case for which she had assisted in the investigation (the Kim case). When asked on the stand why her testimony differed from that of the other witnesses, White yelled at the defense attorney, “They are liars!” When White testified the following month in the same case, the defense attorneys demonstrated that White’s testimony

contained significant factual errors. The defense attorneys filed a personnel complaint against White with the DA’s office, alleging perjury and the filing of false reports.

In April and May 2011, White told Carver that she needed to take time off from work to undergo treatment. The DA approved White’s request for FMLA leave on June 6, 2011. White’s treatment took longer than expected, so White’s psychiatrist requested two leave extensions. While White’s doctor originally requested leave through June 20, 2011, White was not able to return to work until September 7, 2011. White’s FMLA leave expired on August 5, 2011, so the DA put her on unpaid, but authorized, medical leave from August 5 until September 7, 2011. Effective September 7, 2011, the DA restored White to employment, but placed her on paid administrative leave and reassigned her to her home pending an administrative investigation into her conduct while testifying in the Kim case.

Pursuant to the Los Angeles Civil Service Rules, the DA requested the Occupational Health Programs (OHP) for permission to require White to undergo a medical reevaluation. Based on a review of White’s pre-FMLA leave conduct and her job requirements, the OHP agreed. White was ordered to appear for a medical reevaluation that would be performed on January 27, 2012 by a doctor at the OHP. The OHP ordered a reevaluation based solely on White’s erratic conduct prior to her FMLA leave, not to any conduct occurring while she was on leave or after she returned from leave. White was warned that failure to appear may be cause for disciplinary action. She failed to appear. The DA rescheduled her appointment and warned her that failure to appear may be cause for disciplinary action. White again failed to appear.

On February 23, 2012, White filed a civil action seeking injunctive relief or a writ of mandate prohibiting the DA from requiring her to appear for a medical or disciplining her for failing to appear. She alleged that the reevaluation order violated her right under the FMLA to be restored to employment. The superior court found in White’s favor, concluding that the certification from White’s doctor that she was fit for work upon her return from FMLA leave must be accepted as sufficient. The court issued a permanent injunction and a writ of mandate. The DA appealed, and the Court of Appeal reversed.

Under the FMLA, an employee returning from FMLA leave is entitled to be restored to his or her employment position or an equivalent position. If the employer has a uniformly applied practice or policy requiring it, the employer may require each employee taking FMLA leave to provide certification from the employee’s health care provider that the employee is able to resume work.

The Court held that White was returned to work on September 7, 2011, and therefore the FMLA return to work requirements were not implicated. Rather, the issue was whether, after an employee has been returned to work, the FMLA prevents an employer from ordering the employee to submit to a medical reevaluation related to the serious health condition for which the employee was granted leave. The Court held that it does not.

After granting White the full 12 weeks of FMLA leave, the DA reinstated White to employment based on the certification from her psychiatrist that she was ready to return. Four months later, it ordered White to submit to a medical reevaluation.

The FMLA regulations provide that after an employee returns from FMLA leave, it is a violation of the Americans with Disabilities Act (ADA) to require a medical examination unless the examination is job-related, consistent with business necessity, and conducted at the employer’s expense. The regulations were meant to clarify that a bright line exists at the employee’s return to work. Before the return to work, the employer must accept the employee’s physician’s certification and return the employee to employment. After the return to employment, the FMLA protections no longer apply, and the employer may require a fitness for duty examination consistent with the ADA.

While the doctor’s opinion as to whether an employee should be returned to work is conclusive, the Court noted that it is unlikely that Congress intended an employee’s doctor’s opinion to be conclusive on the employee’s fitness for work. It also noted that its conclusion was particularly applicable to the facts of this case, where White was a peace officer carrying a weapon. Government Code section 1031 requires that peace officers be free from physical, emotional, or mental conditions that may adversely affect their exercise of peace officer powers.

The Court concluded that the DA did not violate the FMLA when it ordered White to appear for a fitness for duty examination. It reversed the superior court’s orders and ordered judgment in the DA’s favor.

White v. County of Los Angeles (2014) 170 Cal.Rptr.3d 472.

Employee Who Waived FMLA Claims By Signing Severance Agreement Could Not Then Bring Lawsuit Alleging FMLA Violations. Hartford Fire Insurance Company (Hartford) employed Blanche Paylor as a Long Term Disability Analyst III. Between January 2008 and September 2009, Paylor requested and received 390 hours of leave under the Family Medical Leave Act (FMLA). Paylor submitted a request for additional FMLA leave in or around early September 2009. Hartford either acknowledged or approved the request on September 4, 2009. On September 11, 2009, Paylor received a performance evaluation in which she was warned about/criticized for her job performance. On September 16, 2009, Hartford provided Paylor the following choice: she could accept a one-time offer of 13 weeks of severance benefits in exchange for signing a severance agreement under which she waived any claims she might have under the FMLA, or Paylor could agree to a performance improvement plan that would require her to meet various performance benchmarks or face termination. Paylor signed the severance agreement on September 17, 2009.

Paylor then joined two other plaintiffs in filing a complaint against Hartford for FMLA violations, alleging that Hartford interfered with her FMLA rights and retaliated against her for exercising her rights. Hartford filed a motion for summary judgment, arguing that Paylor waived her FMLA claims when she signed the severance agreement because she knowingly and

voluntarily signed the agreement after the events allegedly giving rise to her FMLA claims occurred. The district court granted summary judgment to Hartford, and Paylor appealed. The Court of Appeals for the Eleventh Circuit affirmed.

On appeal, Paylor argued that she did not waive her FMLA rights because the FMLA does not permit employees to waive “prospective rights” without Department of Labor or court approval, and that her rights in this case were “prospective” because she had an outstanding request for FMLA leave when she signed the agreement.

Title 29, section 825.220 of the Code of Federal Regulations, one of the Department of Labor’s FMLA regulations, provides that employees cannot waive their prospective rights under the FMLA, but also states that “[t]his does not prevent the settlement or release of FMLA claims by employees based on past employer conduct….” Paylor argued that “prospective rights” meant any unexercised rights of a current eligible employee to take FMLA leave and to be restored to the same or equivalent position after the leave. The Court of Appeals disagreed, stating that prospective rights should be interpreted as rights that allow an employee to invoke FMLA protections at some unspecified time in the future, and that a prospective waiver is a waiver of something that has not yet occurred. For instance, an employer could not offer all new employees a one-time cash payment in exchange for a waiver of claims for any future FMLA violations.

In this case, Hartford did not ask Paylor to waive claims for any future FMLA violations, but to release any claims she might have based on past FMLA violations. All of the conduct Paylor complained about occurred before she signed the severance agreement. Therefore, Paylor settled claims based on past employer conduct, and the district court did not err when it concluded that the agreement was valid.

Paylor also argued that her waiver was not “knowing and voluntary.” In considering whether a waiver was knowing and voluntary, courts apply the totality of the circumstances test, and evaluate the following factors: (1) the education and business experience of the employee; (2) the time the employee spent considering the agreement before signing it; (3) the clarity of the language in the agreement; (4) the employee’s opportunity to consult with an attorney; (5) whether the employer encouraged or discouraged consultation with an attorney; and (6) the consideration given in exchange for the release compared to the benefits the employee was already entitled to receive.

In this case, Paylor was 56-years-old when she signed the agreement, and she had worked in the insurance industry for over 20 years. The agreement expressly stated that Paylor had 21 days to review it. The agreement was clearly worded, and Paylor acknowledged in her deposition that she understood the waiver language and that the agreement recommended she consult with an attorney. By signing the agreement, Paylor received severance pay to which she was not otherwise entitled. Thus, the Court of Appeals held that there was no material issue of fact as to whether Paylor’s waiver was knowing and voluntary, and the district court did not err by granting summary judgment in favor of Hartford.

Paylor v. Hartford Fire Insurance Company (11th Cir. 2014) __ F.3d __ [2014 WL 1363544].

PUBLIC RECORDS

Communications Sent or Received Between City Officials on Personal Devices from Personal Accounts Are Not Public Records. In 2009, Ted Smith presented the City of San Jose with a Public Records Act (PRA) request for communications regarding a development project for the City. Among other things, Smith sought voicemails, emails or texts sent or received on personal electronic devices used by the mayor, city council members and staff. The City agreed to produce records stored on its servers and those transmitted to or from private devices using City accounts, but did not produce communications from the individuals’ personal electronic accounts that were stored solely on personal devices or servers.

Smith filed an action for declaratory relief. The trial court found that the City was required to produce the requested communications notwithstanding the fact that the communications were not directly accessible by the City because they were sent from and received on private devices using private accounts. The City filed a petition for writ of mandate to overturn the judgment granted in Smith’s favor, which the Court of Appeal granted.

On appeal, the Court of Appeal addressed the issue of whether private communications, which were not stored on City servers and not directly accessible by the City, are public records under the PRA (Government Code section 6250 et seq.).

While both parties made various policy arguments, the Court of Appeal noted that the question could only be answered by analyzing the language of the PRA. The PRA’s definition of “public records” includes any writing relating to the public’s business that is “prepared, owned, used, or retained by any state or local agency.”

While Smith argued that a local agency can only act through its officials and employees, the PRA’s definition of “local agency” does not include the individual members or representatives of the agency. Thus, the City must prepare, own, use, or retain the writing in order for it to be a public record, and any writings the City cannot access cannot fall within the definition of public record. The Court acknowledged concerns voiced by Smith and the news media that City employees and officials could conduct business out of public review by using personal accounts and personal devices, but stated that the concern must be addressed by the Legislature.

Thus, the Court held that the requested records, communications sent or received by public employees and officials on exclusively private devices using their private accounts, were not

public records. It granted the City’s petition for writ of mandate and ordered the superior court to grant summary judgment in the City’s favor.

City of San Jose v. Superior Court (2014) __ Cal. App.4th__ [2014 WL 1254821].

California Supreme Court Holds Names of Police Officers Involved in Shooting Are Subject to Disclosure Under the Public Records Act. The Los Angeles Times made a request under the California Public Records Act (CPRA) for the names of Long Beach police officers involved in a shooting that resulted in a citizen’s death, along with the names of officers at the department who had been involved in shootings over the preceding five years. The Long Beach Police Officers’ Association (Union) sued for an injunction to stop the City from disclosing the officers’ names. In response, the City determined that it also considered the information sought by the Times to be exempt from disclosure. The Times joined the litigation, arguing that the CPRA required disclosure of the information.

The City and Union argued that the information sought constituted peace officer personnel information exempt from disclosure under the Pitchess statutes, Penal Code sections 832.7 and 832.8. They argued that the information was related to “discipline” or “appraisal” of officers. The City also submitted a declaration explaining that, because the Department conducts an administrative investigation into every officer-involved shooting, documents resulting from the investigations should be treated as protected personnel records, and the officers’ names should come within this protection.

In addition, the City and Union argued that the information was protected from disclosure under balancing provisions of the CPRA, including the catch-all exemption and the exemption for personnel records, the disclosure of which would constitute an unwarranted invasion of personal privacy.

The City and Union submitted declarations expressing their concern for their officers’ safety if names were released. A declaration by the Union’s president compared the situation to a then- recent police shooting case in which the release of an officer’s name led to death threats. He also cited an anonymous Internet post “wishing that the children of an officer . . . would experience Christmas without their father.” The City cited the occurrence of retaliation when officers are involved in shootings of gang members, and graffiti that had appeared in the City such as “Strike Kill a Cop.” Both the Union and City explained the ease of finding information on officers and their families through the Internet.

Notwithstanding this evidence, the trial court denied the request for an injunction, determining that the officers’ names were not subject to any CPRA exemption and consequently had to be disclosed. The Court of Appeal affirmed, reasoning that the evidence of potential harm presented by the Union and the City was too speculative to preclude disclosure.

The California Supreme Court declined to read Penal Code section 832.8 broadly and determined that in general only records generated in connection with officer appraisal or discipline are protected by Section 832.8, not records that could possibly be considered for officer appraisal or discipline. The Supreme Court held that, although the Penal Code makes complaints or investigations of complaints confidential, the newspaper’s request here was not for complaints against officers.

As to the privacy arguments, the Supreme Court determined that the public interest in peace officer conduct is significant and, in the circumstances presented in this case, outweighs an officer’s privacy interest in maintaining the confidentiality of his or her name. To prevent disclosure in a case such as this one, there would need to be evidence that disclosing a particular officer’s identity would jeopardize that officer’s safety or efficacy.

The Supreme Court emphasized that it is still possible for Police Departments to prevent disclosure if a sufficient evidentiary showing is made:

“We do not hold that the names of officers involved in shootings have to be disclosed in every case, regardless of the circumstances. We merely conclude, as did the trial court and the Court of Appeal, that the particularized showing necessary to outweigh the public’s interest in disclosure was not made here, where the Union and the City relied on only . . . general assertions about the risks officers face after a shooting. . . . The trial court’s denial of injunctive relief was without prejudice to any later evidentiary showing that disclosing a particular officer’s name would compromise that officer’s safety or the safety of the officer’s family. That ruling permits further litigation by the Union, and it reflects the trial court’s recognition, which we share, that the public’s interest in access to public records is not absolute and must be weighed against the countervailing privacy and safety interests of peace officers.”

The Court indicated that evidence of specific harm to a particular officer would suffice to protect against disclosure, and that other safety reasons or reasons specific to an officer’s duties — as, for example, in the case of an undercover officer — could outweigh the public’s interest in disclosure.

In this case, there was no evidence of specific safety concerns regarding any particular officer. Although there was evidence that local gangs would retaliate, the shooting in question was not of a gang member. Moreover, the other evidence, for example the graffiti that read “Strike Kill a Cop,” and the fact that general safety bulletins had been issued by the Department did not establish any specific danger to the officers involved in the shooting at issue, or as to the other Long Beach officers involved in incidents in the past five years whose names had been requested. Thus, the California Supreme Court affirmed the trial court’s denial of the Union’s requested injunction.

Long Beach Police Officers Association v. City of Long Beach (2014) __ Cal.4th __ [2014 WL 2219041].

LABOR RELATIONS

County Complied With Its Meet and Confer Obligations Prior to Reducing Work Hours at the County Jail. The County of Santa Clara and the Santa Clara County Correctional Peace Officers’ Association (Association) entered into a memorandum of understanding (MOU) in June 2008 that was valid through May 29, 2011 and from year to year thereafter. The MOU provided that a full work week is 40 hours except as otherwise provided in the MOU or by law, and it recognized three alternative work schedules for correctional officers: five eight-hour days a week (the 5/8 Plan), four ten-hour days a week (the 4/10 Plan), or 12.25 hours four days one week and three days the next (the 12 Plan). The 12 Plan, which called for 85.75 hours biweekly, was the exception to the 40-hour work week.

Section 7.1 of the MOU reserved for the Appointing Authority the right to convert assignments on the 12 Plan to either a 5/8 or 4/10 Plan “upon the giving of forty-five (45) calendar days’ advance notice of such change to the Association, which shall be afforded the opportunity to meet and confer on such a proposed change prior to its implementation.”

In 2011, the County was facing a projected budget deficit of $230 million, and asked the Department of Corrections (DOC) to make budget cuts of $15 million while avoiding staff layoffs. The Acting Chief of the DOC notified the Association by certified letter on May 19, 2011 that it intended to change the 12 Plan to a 5/8, 4/10 or modified 12 Plan (80-hour work schedule) to become effective on July 4, 2011, but that the assignments would not be implemented until the parties had an opportunity to meet and confer.

The Acting Chief and representatives of the DOC met three times. At the meetings, the Association disputed the existence of the budget deficit, but failed to offer other alternatives for saving $15 million. Five days before the third meeting, the County Board of Supervisors unanimously voted to accept the County’s proposed budget, which included the modified 12 Plan.

Approximately two weeks after the third and final meeting, the Association provided the County with the results of the members’ vote. The Association members rejected the County’s MOU proposal by a vote of 200 to 15. As to the different 12 Plan schedules presented, 236 members voted in favor of one eight-hour day per pay period with the rest 12-hour days.

The Association filed a petition for writ of mandate, alleging that by modifying the 12 Plan the County breached its duties to meet and confer and to bargain in good faith under the MOU, the Meyers-Milias-Brown Act (MMBA) and the County’s Code. The trial court denied the petition, and the Association appealed. The Court of Appeal affirmed.

On appeal, the County asserted that the Association’s action was barred because it failed to exhaust the procedures in the MOU for resolving employee grievances and organizational grievances. However, because the MOU specifically exempts from the grievance procedures any “[i]tems within the scope of representation and subject to the meet and confer process,” the Court of Appeal rejected the argument. The County also asserted that “a compelling business necessity” justified unilateral action. However, the Court held that the evidence did not establish a financial emergency that required an immediate response, but rather budget cuts that were foreseeable in nature.

The Association argued that the County set an arbitrary deadline and failed to meet its obligation to meet and confer in good faith, including participating in impasse resolution, before implementing the work schedule change.

The Court rejected the Association’s argument that the County set an arbitrary deadline. Government Code section 3505, part of the MMBA, requires parties to meet and confer promptly and “continue for a reasonable period of time.” In this case, the MOU provided that the County could convert 12 Plan assignments to the 5/8 or 4/10 Plans 45 days after giving written notice and providing the opportunity to meet and confer. The County scheduled this modification to coincide with its new fiscal year. The Court held that neither the 45-day period nor the date was an arbitrary deadline.

The Court also rejected the Association’s argument that the County was required to proceed to impasse. In 2011, when the Association filed its writ petition, the MMBA did not mandate an impasse resolution procedure. And, while the Santa Clara County Code allows for impasse and provides the procedures for doing so, it does not mandate that parties proceed to impasse.

Further, as the County argued, the impasse procedures were never triggered because the County reserved the right to unilaterally convert the 12 Plan as long as it gave the Association 45-days’ notice of the proposed change and provided the opportunity to meet and confer. In light of the County’s reserved right in the MOU and its inherent managerial right to decide how to accomplish its budget target, the Court held that the County was not required by the MOU or the MMBA to meet and confer about the need to reduce the budget of the DOC or about the policy decision to avoid layoffs in making reductions. The MOU only required the County to meet and confer regarding the details of implementing its right to convert 12 Plan employees to other plans.

While the MOU only explicitly granted the County the right to convert employees from the 12 Plan to a 5/8 or 4/10 Plan, and not to a Modified 12 Plan, the Court held that this conversion right, as well as the power to lay off employees for budgetary reasons, implicitly included the right to offer its 12 Plan employees other formulas for working 80 hours biweekly. Because the County met and conferred before exercising this reserved right, it complied with its meet and confer obligations. Further, because the County met with the Association three times to discuss implementation, it met its obligation to bargain in good faith. Thus, the Court affirmed the trial court’s denial of the Association’s writ petition.

Santa Clara County Correctional Peace Officers’ Association, Inc. v. County of Santa Clara (2014) __ Cal.App.4th __ [2014 WL 1013230].

A County Cannot Order A Union President To Disclose Information Discussed At A Union Board Meeting. The Executive Board of the Merced County Sheriff’s Employees Association met to discuss various matters of concern to the union. The Association’s attorney attended the meeting. Among the matters discussed was a report of an alleged fight among inmates in yard of the County jail. The Board members discussed the potential risk to officer safety posed by the fight.

The Association attorney sent a letter to the Sheriff expressing the concerns of the Board. A department commander initiated an investigation of the issues raised in the letter. Early in the investigation, the commander viewed a surveillance video that raised questions about whether there had actually been a fight in the jail yard. The commander asked the Association president for the name of the person who reported that there had been an inmate fight. In response, the president asked the commander whether he was being ordered to answer the question and was told that he was. Under threat of discipline if he had not responded, the president answered the question and gave the name of the employee who reported the fight.

The Association filed an unfair labor practice charge with the Public Employment Relations Board (PERB) alleging that the commander violated the rights of the union by requiring disclosure of information from the Board meeting. There were several other allegations presented to the Administrative Law Judge (ALJ)who heard the case, but those other issues were not appealed to the PERB Board. The only matter covered in the appeal was the requiring of disclosure of the employee’s name. The ALJ sustained the charge finding that the disclosure interfered with employee rights. PERB affirmed the ALJ’s decision and adopted his findings of fact and conclusions of law.

The focus of PERB’s discussion was on the nature of the subject matter discussed at the Board meeting, finding that “(r)eporting safety concerns to an exclusive representative is protected activity.” The requirement that the president disclose the name of the officer who reported the safety concerns interfered with the exercise of a protected right. PERB discussed the harm suffered by the Association, concluding as follows: “The harm here is not simply seeking to learn what transpired at a union meeting and is not dependent on whether an attorney was present. The harm lies in the potentially chilling effect the employer’s conduct under the facts of this case has on employee discussions with their union representatives about matters protected under the MMBA.”

Merced County Sheriff’s Employee Association v. County of Merced (2014) PERB Decision No. 2361-M

Employee Association’s Deadline to Request Fact Finding Was Triggered By Its Declaration of Impasse, Not By the City’s Rejection of the Association’s Request to Mediate. On June 30, 2012, the memorandum of understanding (MOU) between the Redondo Beach Police Officers Association (Association) and the City of Redondo Beach expired. For a period of sixteen months, the parties negotiated over a successor MOU for the 2013-2014 fiscal year. On July 11, 2013, the Association provided the City with a memorandum entitled: “Meet and Confer/Declaration of Impasse/Request for Mediation MOU for period of July 1, 2012 to June 30, 2013.” At some point thereafter, the Association requested mediation, which is voluntary pursuant to the City’s local rules.

The City declined the Association’s mediation request on October 23, 2013 and, approximately three weeks later, presented the Association with a “Last Best and Final Offer” (LBFO). The City gave the Association until November 20, 2013 to accept, or “the City shall consider the failure to timely agree to result in a concurrent declaration of impasse by the City and [the Association] shall be concurrently on notice that an impasse has been declared without provision to it of further notice in that regard.”

In a letter dated November 20, 2013, the Association requested fact finding. PERB’s Office of the General Counsel issued an administrative determination that the Association’s fact finding request was not timely. The Association appealed, and PERB affirmed.

As an initial matter, PERB addressed whether it had the authority to consider the Association’s appeal. Government Code section 3509 of the Meyers-Milias-Brown Act (MMBA) lists some of PERB’s powers and duties, but then states that the powers and duties do not apply to management employees. Section 3511 states that changes made to Section 3509 do not apply to peace officers. Because the Association appears to represent management employees and peace officers, PERB may not have jurisdiction over appeals governed by Section 3509. However, PERB’s authority over this appeal comes from Section 3505.4, which does not contain any exceptions for management employees or peace officers. Thus, PERB held that it has jurisdiction over the Association’s appeal.

Section 3505.4 provides that an employee association may request that the parties’ differences be submitted to a fact finding panel. “If the dispute was not submitted to mediation, an employee organization may request that the parties’ differences be submitted to a fact finding panel not later than 30 days following the date that either party provided the other PERB Regulation 32802 further provides that the fact finding request may be filed “(1) Not sooner than 30 days, but not more than 45 days, following the appointment or selection of a mediator pursuant either to the parties’ agreement to mediate or a mediation process required by a public agency’s local rules; or (2) If the dispute was not submitted to mediation, not later than 30 days following the date that either party provided the other with written notice of a declaration of impasse.”

The Association declared impasse on July 11, 2013, and requested “all official procedures and processes that are associated with such declaration.” While it later requested mediation, the

parties did not agree to submit their dispute to mediation. Thus, the Association’s deadline to request fact finding was 30 days after it provided the City with its written notice of impasse. The fact that the City waited well beyond the 30-day period to deny mediation did not alleviate the Association’s responsibility to meet its deadline to request fact finding, especially when its own declaration of impasse triggered the deadline.

Therefore, PERB denied the Association’s appeal.

City of Redondo Beach v. Redondo Beach Police Officers Association (Police Management Unit), PERB No. A409M, __ PERC ¶ ___.

PERB Again Takes Position That Fact Finding Procedures Apply to Bargaining Disputes Over All Matters Within Scope of Representation The County of Fresno and Service Employees International Union, Local 521 (SEIU) were engaged in negotiations over proposals by the County to create two new specialized assignments for Correctional Officers in the County Jail. The assignments would be exempt from the seniority-based bidding procedure. The County also proposed to increase the number of 12-hour shifts in the County Jail. The parties met and conferred three times and the County implemented its proposals. SEIU filed its request for fact finding on October 30, 2013 after claiming that the parties declared impasse two days earlier.

The County objected to the request on the grounds that (1) it was premature because no written notice of impasse had been issued by either party, (2) PERB was enjoined from approving any request for fact finding in any bargaining dispute except for a new or successor comprehensive memorandum of understanding (MOU) and (3) the legislative history of AB 646 [providing for fact finding] shows the Legislature intended to limit fact finding procedures only to collective bargaining agreements or MOUs.

The Office of General Counsel for PERB rejected the County’s objections and ordered the parties to select fact finding panel members. The County appealed, and PERB affirmed. At the outset, PERB determined that it had jurisdiction to determine whether the provisions of Government Code section 3505.4 apply to a fact finding request. The County had argued that PERB lacked the jurisdiction to hear the appeal of the Office of General Counsel’s administrative determination because PERB may only enforce the Meyers-Milias-Brown Act (MMBA) through unfair practice charges. PERB rejected this argument, noting that its authority to appoint a fact finding panel is not based on any alleged violations of the MMBA, and derives from a different section of the MMBA than the one that covers unfair practice charges.

PERB also rejected the County’s argument that its decision regarding fact finding could unfairly prejudice the outcome in the separate unfair practice charge proceeding. It noted that while the issues conceivably overlapped, its decision would not cause any prejudice because it was not dictating an outcome in the underlying bargaining dispute; it was simply determining whether the Office of the General Counsel correctly determined that the fact finding process applied to

this bargaining dispute. The only remedy PERB could issue in this case would be to order the parties to engage in fact finding, while resolution of the unfair practice charge could result in an order for the County to rescind its unilaterally-imposed changes.

The County also argued that because a superior court issued an injunction in County of Riverside v. Public Employment Relations Board (2013) Case No. RIC 1305661 barring PERB from approving any request for fact finding in any bargaining dispute other than for a new or successor comprehensive MOU, PERB was prohibited from processing SEIU’s factfinding request in this case. PERB rejected the argument, noting that it is well settled that a court decision is not binding until it is final. Because the superior court’s opinion is currently on appeal, it is not final and PERB is not bound by it.

The County also argued that the legislative history of AB 646, the bill that instituted the new fact finding procedures, indicates that it was only intended to apply to impasses in negotiations for new or successor MOUs. Accordingly, fact finding does not apply to impasses in bargaining over mid-term reopeners, or the effects of non-mandatory subjects of bargaining such as layoffs or other single-issue disputes.

PERB previously addressed this argument in County of Contra Costa (2014) PERB Decision No. Ad-410-M, and held that AB 646 did not limit fact finding procedures to impasses in negotiations for comprehensive MOUs. Further, PERB applies the impasse resolution procedures provided in the Educational Employment Relations Act (EERA), a statutory scheme similar to the MMBA, to all bargaining disputes. PERB presumed that the Legislature knew this when it passed AB 646, and reasoned that it could have drafted specific language if it only intended for fact finding to apply to new or successor comprehensive MOUs.

For the foregoing reasons, PERB affirmed the Office of the General Counsel’s order that the parties select fact finding panel members.

County of Fresno (2014) PERB Decision No. Ad-414-M, __ PERC ¶ ___.

District Violated EERA When It Ceased Providing Release Time to Union President Without First Providing Notice and Opportunity to Bargain The Centinela Valley Union High School District and the Centinela Valley Secondary Teachers Association (CVSTA) are parties to a collective bargaining agreement (CBA) that includes the following provision:

The CVSTA President will be released from 40% of her/her assignment in order to participate in district/school meetings, educate/train staff, visit school sites, improve community relations, and perform other functions necessary for carrying out his/her duties.

This provision, Section 12.19, has been included in successive CBAs since, at least, the 2004- 2005 school year. Full-time classroom teachers in the District are typically assigned to teach five

periods, with a sixth unassigned period used for preparation. Full-time counselors are expected to manage a caseload of 500 students. Generally, when the District implemented Section 12.19, it would release the CVSTA president from teaching two of his or her teaching periods if he or she was a teacher or reduce the CVSTA president’s caseload to 300 students if he or she was a counselor. CVSTA presidents never had their salaries reduced as result of these reductions.

During the 2010-2011 school year, Elizabeth Setterlund, a physical education teacher, was the CVSTA President. From the beginning of the 2010 school year until April 2011, the District released Setterlund from two instructional periods per day. During the released periods, Setterlund attended meetings with representatives from the union and the District to discuss possible changes to employee health benefits, participated in committee meetings held at different school sites, met with employees to discuss grievance issues, and participated in contract negotiations.

On January 21, 2011, the District sent CVSTA an invoice for approximately $312,000 to be paid within ten days of receipt. The invoice represented the total amount of compensation paid to CVSTA presidents during Section 12.19 release time since the 2001-2002 school year. The District cited Education Code section 44987 as its authority to collect the reimbursement. The parties met twice after CVSTA sent the invoice. At one meeting, the reimbursement issue was discussed. On April 14, 2011, the District sent CVSTA a letter stating that it would terminate Section 12.19 release time effective April 18, 2011. It reiterated its demand for the $312,000, plus an additional $11,000 paid to then CVSTA President Setterlund between January and March 2011.

CVSTA filed an unfair practice charge with PERB. PERB’s Office of the General Counsel issued a complaint alleging that the District violated the EERA when it (1) requested reimbursement and (2) unilaterally terminated Section 12.19 release time without prior notice and an opportunity to bargain. The Administrative Law Judge issued a proposed decision in which it dismissed as untimely CVSTA’s objection to the District requesting reimbursement. The Judge determined that CVSTA did not file its charge regarding the reimbursement until September 2011 despite receiving the reimbursement request in January 2011, thus it was untimely.

The Judge also found, however, that the District breached its duty to bargain in good faith by terminating Section 12.19 release time without prior notice and an opportunity to bargain. The District only gave CVSTA four days’ notice of its decision to discontinue Section 12.19 release time, which the ALJ found did not provide CVSTA a reasonable opportunity to bargain. Even if the amount of time was reasonable, the ALJ found that CVSTA did not waive its right to bargain because a request to bargain at that point would have been futile. The District filed a statement of exceptions, but PERB accepted and affirmed the ALJ’s decision.

The District argued that PERB lacked jurisdiction over the issue of release time because it is governed by Education Code section 44987, not the EERA, and is therefore outside the scope of representation. Education Code section 44987 provides that the governing board of a school

district shall grant an employee a leave of absence without loss of compensation for the purpose of enabling the employee to serve as an elected officer of an employee organization, but that the District may seek reimbursement from the employee organization.

As the ALJ noted in his decision, the CBA provision made no mention of Section 44987, nor was there any evidence that the parties intended that release time be governed by Section 44987. Further, the CBA specifically provided for release time in order to participate in district/school meetings, school visit sites, employee trainings, and improvement of community relations, while Education Code section 44987 permits release time for the specific purpose of attending employee organization meetings. PERB agreed with this reasoning, and added that the District never treated Section 12.19 leave as Section 44987 leave. Education Code section 44987 was enacted in 1978, and Section 12.19 has provided 40 percent leave time since at least 2001, but the District never requested reimbursement until 2011.

Furthermore, release time to participate in negotiations and perform other union-related duties has long been a subject within the scope of representation, and a proposal regarding a statutory provision such as Education Code section 44987 is negotiable unless the statutory provision is immutable and does not grant the employer any flexibility. Here, Education Code section 44987 did not set an inflexible standard, and it could be harmonized with the CBA provision. Therefore, PERB held that the ALJ properly exercised jurisdiction over the charge, a matter within the scope of representation.

PERB also held that CVSTA did not waive its right to bargain over termination of Section 12.19. The District argued that it provided CVSTA notice at its January 25, 2011 meeting that it would seek reimbursement for past release time and terminate granting this leave if the CVSTA did not reimburse the District. In light of conflicting evidence, the ALJ found that, more likely than not, the issue of possible termination was not raised at the meeting. Finding no basis to overturn this finding, PERB affirmed.

Thus, PERB affirmed the ALJ’s decision that the District violated the EERA when it ceased granting 40 percent release time without providing adequate notice and the opportunity to bargain.

Centinela Valley Union High School District (2014) PERB Decision No. 2378, __ PERC ¶ ___.

U.S. Supreme Court Holds That In-Home Service Providers in Illinois Who Are Not Union Members Cannot Be Required to Pay An Agency Fee. Illinois has a program designed to assist individuals who, due to age or medical condition, are unable to live in their own homes without assistance but are also unable to afford the expenses of in-home care. Under Illinois law, the State provides in-home service providers who are jointly employed by the State, who compensates the personal assistants, and the “customers” who are the individuals receiving the care. Illinois law provides that the personal assistants are “public

employees” of the State but solely for the purposes of coverage under the state’s public labor law.

Service Employees International Union was the exclusive representative for the personal assistants for purposes of collective bargaining. The Union and State negotiated an agency shop provision into the collective bargaining agreement requiring all personal assistants who are not union members to pay a “fair share” of the union dues. Three of the personal assistants objected to this agency fee and sued the State and Union alleging that the agency shop violated their First Amendment rights because they were required to pay a fee to a union that they do not wish to support.

The Supreme Court held, in a 5-4 decision, that in-home service providers in Illinois who are not union members cannot be required to pay the Union an agency fee.

The Court’s decision heavily criticized the Court’s prior decision in Abood v. Detroit Board of Education, 431 U.S. 209 (1977). In Abood, the Court held that public employees who choose not to join a public-sector union may nevertheless be compelled to pay an agency fee to support union work that is related to collective-bargaining, contract administration, and grievance adjustments, but not for the union’s political or ideological purposes.

The Court distinguished the personal assistants in Illinois from “full-fledged public employees.” The Court found that personal assistants are almost entirely answerable to the customers, who have the ability to hire, evaluate, establish working conditions, and fire the personal assistants. In turn, the Court found that the scope of collective bargaining on their behalf is sharply limited. Courts have upheld the constitutionality of agency fees because the State compels the union to promote and protect the interests of nonmembers in negotiating and administering a collective bargaining agreement and representing the interests of employees in settling disputes and processing grievances. The Court found that these rationales do not apply to personal assistants because the State requires that they all receive the same pay rate and the Union has no authority to represent a personal assistant in a grievance against a customer.

Thus, the Court narrowly held that an agency shop is not constitutional for the personal assistants in Illinois because it infringes on their First Amendment rights of speech. The Court did not, however, find that agency shops are unconstitutional for “full-fledged public employees.”

Harris v. Quinn (2014) __ S.Ct. __ [2014 WL 2921708].

A County Housing Commission Has Statutory Authority To Contract Out For Housing Inspection Services And Lay Off Represented Employees. In 2009 the Sonoma County Community Housing Commission contracted with a private company for housing inspection services during high workload periods.

County employees represented by SEIU had been performing such services but SEIU told the County it would not oppose the contracting for overflow work unless that work were to increase. If that increase rose to the level of a part-time employee, then SEIU said it expected the County to fund such a position instead of contracting.

After three years of contracting for overflow inspection services, the Commission decided to contract for all housing inspection services. It indicated it was doing so as a cost-saving measure. The Commission advised SEIU that it would be laying off three full time employees.

SEIU sued to prevent the contracting out and the resulting layoffs. The Superior Court dismissed the lawsuit and SEIU appealed.

The First Appellate District upheld the dismissal of SEIU’s lawsuit. The Court cited Health and Safety Code Sections 34144 and 34145, finding that those statutes granted the Commission the authority to “hire, employ or contract for staff, contractors or consultants” (emphasis added). The Court concluded that the statutory language demonstrated a clear legislative intent to allow the Commission to do exactly what it did.

SEIU tried to argue that the Health and Safety Code statutes were merely grants of authority to “pay for services” and not authorization to contract with a private company. SEIU cited other statutes to support its contention that the Commission’s ability to contract was limited to doing so only with another public agency. The Court rejected this argument by relying on the specific language of the Health and Safety Code statutes which made no distinction between public and private contracting. Specifically, the Court said it would be absurd for the Legislature to authorize payment to a private contractor if it did not have the authority to hire that contractor.

SEIU also contended that Government Code Section 53060 limited the Commission to contracting only for specialized services. The Court rejected that argument by finding that the Government Code section was general and applied to all public entities. By contrast, the Court found that the Health and Safety Code sections were more particular, applying specifically to housing commissions. Those latter sections explicitly authorized the Commission to contract for housing inspection services.

Service Employees International Union, Local 1021, AFL-CIO v. County of Sonoma (2014) __ Cal.Rptr.3d __ [2014 WL 3361438].

PUBLIC SAFETY

A Terminated Police Officer May Assert Violations Of POBRA In His Disciplinary Appeal Arbitration And Is Not Limited To Raising Those Issues Solely In Superior Court James Mitchel was a captain in the Santa Rosa Police Department. He was fired following an investigation of gender discrimination complaints against him and the Chief. He appealed his termination and also filed a Superior Court complaint alleging violation of his due process rights, among other allegations.

Mitchel’s appeal of his termination was rejected by an arbitration panel which found just cause for his dismissal. The panel did not address Mitchel’s claims that the City had violated his rights under the Public Safety Officers’ Procedural Bill of Rights Act (Gov’t Code 3300 et seq) (POBRA).

Since his original lawsuit was dismissed without prejudice pending the arbitration panel decision, Mitchel sued again, challenging the panel’s decision and making various procedural arguments. The City removed the case to federal court. After four (4) years of unsuccessful litigation in federal and state trial courts, Mitchel pursued an appeal to the First District of the California Court of Appeal.

The primary issue on appeal was Mitchel’s contention that the arbitration panel failed to consider his contention that the City had violated his rights under POBRA. The panel had declined to address the POBRA issues because it felt that the Superior Court had exclusive jurisdiction to determine POBRA claims. The Court of Appeal acknowledged that Government Code Section 3309.5 authorizes the Superior Court to decide POBRA issues, but found that the “superior court does not, in fact, have exclusive jurisdiction over POBRA claims.” Instead, the Court found that an “employee may assert violations of POBRA ‘as a defense to discipline in administrative proceedings, or can seek and adjudication in court.’”

Having concluded that the arbitration panel “clearly erred” in failing to consider Mitchel’s POBRA claims, the Court nevertheless declined to vacate the arbitration panel’s upholding of Mitchel’s dismissal. The Court reasoned that Mitchel chose to litigate the POBRA issues in court and lost. Included in that litigation was his assertion that the City had violated his POBRA rights. The Court found that Mitchel cannot now “seek a new arbitration hearing to re-litigate those same issues.”

The Court also considered and rejected Mitchel’s contention that he had been denied the right to pre-hearing discovery. The Court found that he was not denied the right to discovery under either POBRA or the California Arbitration Act (Title 9, Part 3, California Code of Civil Procedure.

Mitchel v. City of Santa Rosa (2/28/14) 2014 WL 795076 (Cal App 1st Dist) UNPUBLISHED

DISCRIMINATION/HARASSMENT/RETALIATION

Employee Terminated For Failing to Complete Job Duties Could Not Show Pretext by Presenting Evidence Four Years After Termination That Employer Was Not Harmed by Employee’s Incompetence. Santa Clara University employed Conchita Franco Serri for 15 years as its Director of Affirmative Action. Serri’s duties included mediating or investigating discrimination and harassment complaints, providing sexual harassment training to University staff, and preparing the University’s annual Affirmative Action Plan (AAP).

In 2005, Serri sent a letter to Father Paul Locatelli, the University President, complaining about a disparity between her salary and that of Charles Ambelang, a male employee in the human resources department. In June 2006, shortly after Serri returned from a medical leave of absence, the University increased her salary from approximately $104,000 to $118,000, retroactive to the date that Serri first informed the University of the alleged salary disparity. The University also provided Serri a 3.5% merit pay increase for the 2006-2007 academic year.

On the same day as the University’s equity adjustment to her salary, Serri filed a formal complaint against Father Locatelli and Robert Warren, the University’s Vice President for Administration and Finance, alleging gender discrimination because she earned approximately $20,000 less than Ambelang, and because she felt “threatened” when Warren allegedly interfered with one of her sexual harassment investigations. The University hired an outside investigator to investigate the claims. The investigator found that Serri’s claims were without merit, and the Board of Trustees affirmed. Serri then filed a discrimination claim with the Department of Fair Housing and Employment (DFEH).

Serri regularly met with her supervisor and the University’s employment attorney to discuss the matters on which she was working, such as the sexual harassment trainings and investigations. Five days after filing her DFEH complaint, Serri informed her supervisor at a regularly scheduled meeting that the University “had not had a defensible Affirmative Action Plan” for several years. Serri said that the entire time she had been Director of Affirmative Action, she had never received the data she needed to complete the AAPs.

Serri was scheduled to meet with Father Locatelli on October 13, 2006 to discuss her cases. Father Locatelli asked Serri to bring the current AAP with her to the meeting, as well as all AAPs from the last ten years. Serri brought two draft AAPs to the meeting- one covering the period February 2006 through January 2007, and one covering November 2006 through October 2007. The University later learned that Serri had created both documents the day before the October 13 meeting. At the meeting, Serri once again stated that the University did not have a

defensible AAP and was likely to be audited by the federal government. For the first time, Serri requested that the University hire a consultant to create a template for future AAPs. When the University reassigned the AAP duties to Serri’s supervisor, Serri filed another claim with the DFEH alleging retaliation.

The University hired another outside investigator to investigate Serri’s claims. This investigator found that Serri had failed to prove her retaliation claims. Two months later, the University terminated Serri’s employment for failing to prepare an AAP for years 2003-2004, 2004-2005, and 2005-2006, for failing to disclose to her supervisors the nonexistence of the AAPs, and for her misrepresentations regarding the AAPs. For instance, when the Director of Sponsored Projects asked Serri in 2006 for a copy of the AAP so that she could attach it to some grant paperwork, Serri did not inform the Director that the University did not have an AAP; she said that the University could not release it because it contained proprietary information. Warren believed that creating the AAP was one of Serri’s critical job duties, and was concerned that the University could lose government funding because it did not have an AAP in place. After the University fired Serri, a 54-year-old Puerto Rican woman, it hired a woman of the same age to replace her.

Serri filed suit against the University, Father Locatelli, Warren, and other University employees for various claims including discrimination, harassment, and retaliation in violation of the Fair Employment and Housing Act (FEHA). The defendants filed motions for summary adjudication and/or summary judgment, which the trial court granted. Serri appealed, and the Court of Appeal affirmed.

A plaintiff claiming discrimination typically must show that he or she is a member of a protected class, was qualified for his or her position, suffered an adverse employment action, as well as some other circumstance that suggests discriminatory motive. If she shows all of the elements, the employer may dispel the presumption of discrimination by articulating a legitimate, nondiscriminatory justification for the action. The plaintiff can then attack the proffered reason and attempt to show that it was false. However, on summary judgment, the employer, as the moving party, has the initial burden of demonstrating either that the plaintiff failed to show an element of discrimination or that the action was based on legitimate, nondiscriminatory factors.

The trial court, in granting the defendants’ motions for summary judgment, determined that the University terminated Serri’s employment because she failed to perform her duties competently. This constituted a legitimate, nondiscriminatory reason.

Serri argued that summary judgment was inappropriate because there was a disputed issue of fact regarding whether preparing the AAP was one of her primary job duties. The Court of Appeal noted that, in a 2006 email to her supervisor, Serri described preparation of the AAP as “one of the roles that define my position.” Further, the Court of Appeal held that whether preparation of the AAP was the most important part of Serri’s job was not a material fact and not at issue. Both sides agreed that Serri’s duties included preparing the AAP, which Serri had failed to do for three years.

Serri argued that the trial court ignored her evidence that the University’s failure to have an AAP for three years would not result in any sanctions, fines, or adverse consequences to the University. In other words, Serri argued that the University’s reason for terminating her employment was false because, according to her expert witness, her failure to prepare the AAP did not, and could not, cause the University harm. However, the University never asserted that it suffered adverse consequences as a result of Serri’s failure to prepare the AAPs, and the expert witness’ declaration was insufficient to create a triable issue regarding whether the University was required to have an AAP. It contradicted Serri’s deposition testimony, in which she testified that federal regulations require the University to prepare an annual AAP, and her documentary evidence, which described the AAP as essential for obtaining and retaining federal grants.

Serri also argued, relying on her expert witness’s declaration, that the University knew any noncompliance with the AAP requirement was easily correctable and would not result in any adverse consequences. However, Serri’s expert’s declaration was prepared four years after she was terminated, and Serri failed to present any evidence that the University knew, when it terminated her employment, that the lack of an AAP would not result in any adverse consequences. To the contrary, Serri, the only person at the University with experience regarding AAPs, told her supervisor and Father Locatelli that the existing AAP was indefensible and that the University would likely be audited by the federal government.

Serri also argued that the University’s reason for terminating her was false because she prepared partial AAPs for 2005 and 2006, and the University failed to provide data and a consultant so that she could prepare the AAPs. However, the AAP consisted of two parts: a narrative portion that Serri was supposed to draft, and several statistical analyses that her assistant was supposed to prepare using data provided by the human resources department. Serri failed to prepare the narrative portion for three years, and she prepared the partial AAPs the night before her meeting with Father Locatelli.

Therefore, the Court of Appeal held that Serri had failed to provide substantial evidence that the University’s reason for terminating her employment was false.

Serri also claimed that the University, Father Locatelli, her supervisor, and the University’s attorney harassed her on the basis of her national origin, age, and sex. Under the FEHA, harassment focuses on situations in which the social environment becomes intolerable because verbal, physical, or visual harassment communicates an offensive message to the employee. It is distinguishable from discrimination, which refers to bias in the exercise of official actions on behalf of the employer.

While Serri disputed the defendants’ declarations that they did not make any hostile or derogatory statements to Serri or any references to any protected status such as gender, she did not submit any evidence that would create a triable issue of fact. Further, to the extent Serri complained about the parties who attended the meetings with her supervisor and how those meetings were conducted, the allegations did not involve harassment, only potential

discrimination, a claim the Court already decided lacked merit. The only harassment evidence Serri submitted involved three comments, none of which would have interfered with a reasonable employee’s work performance. (For instance, Serri alleged that Father Locatelli once told her that her shawl looked like a poncho.) Further, the three comments occurred over a six-year period, which is not pervasive enough to support a harassment claim.

The Court of Appeal similarly disposed of Serri’s arguments regarding her remaining claims, including claims for retaliation, breach of contract and defamation. It held that, because the trial properly granted summary adjudication as to each of Serri’s claims, the grant of summary judgment was proper.

Serri v. Santa Clara University (2014) __ Cal.App.4th __ [2014 WL 2213180].

FIRST AMENDMENT

Compelled Testimony by a Public Employee can be Protected Speech, Even if Related to His/Her Official Duties In 2006, Lane took a probationary position as a program director for at-risk youth at the College. Upon auditing the program’s finances, he found that the program listed a State representative on the payroll who did not report for work. When he raised concerns about this, the College’s president and its lawyer supposedly warned him that terminating the representative could have negative repercussions not just for the College but for Lane personally. Nevertheless, when the representative continued to refuse to report to work, Lane terminated her employment. She thereafter sued, demanding her job back. She also allegedly commented to another program employee that she would “get back” at Lane for terminating her and that, if he requested money from the State legislature, she would respond “you’re fired.”

The FBI subsequently investigated the representative. Lane testified before a federal grand jury concerning her. When the federal government brought criminal charges against the representative, Lane testified in two criminal trials on the charges. In his testimony, he described the events that led to the termination of the representative, which were matters relating to his own job duties.

After his testimony at the criminal trials, Lane lost his employment at the College by way of a layoff. In late 2008, Lane and Steve Franks, the College President, began discussing possible employee layoffs in the at-risk youth program which would be necessary due to budget cuts. Franks sent termination letters to 29 program employees who had fewer than three years of service, including Lane. Franks then rescinded nearly all the terminations on the basis that many employees were not in fact probationary. The terminations of Lane and one other employee, however, were not rescinded. Lane viewed his termination as retaliation for his First Amendment protected speech in testifying at the criminal trials, and sued Franks and the College.

As a general rule, to establish a claim of retaliation under the First Amendment, a public employee must show among other things that his or her speech was not pursuant to “official duties,” i.e., was not speech which the government paid the employee to render as part of his or her job. The U.S. Supreme Court confirmed this rule in its landmark 2006 decision Garcetti v. Ceballos. There, the Supreme Court reasoned: “Restricting speech that owes its existence to a public employee’s professional responsibilities does not infringe any liberties the employee might have enjoyed as a private citizen. It simply reflects the exercise of employer control over what the employer itself has commissioned or created.”

The Eleventh Circuit U.S. Court of Appeals had extended this rule to apply to an employee who testifies about such activities pursuant to “official duties.” In Morris v. Crow, the Eleventh Circuit court held that, when a public employee testifies concerning speech originally made as part of the employee’s job duties, the testimony lacks First Amendment protection. Part of the Court’s reasoning was that the speech in the form of testimony is not voluntary on the part of the public employee, but instead part of the compulsory process of rendering testimony as required by law.

In Lane v. Franks, the U.S. Supreme Court overruled this precedent and held that speech by a public employee rendered as sworn testimony does not lose its First Amendment protection just because it relates to the employee’s discharge of “official duties” Instead, such speech can have First Amendment protection.

The Court’s majority opinion, written by Justice Sotomayor, held: “Truthful testimony under oath by a public employee outside the scope of his ordinary job duties is speech as a citizen for First Amendment purposes. That is so even when the testimony relates to his public employment or concerns information learned during that employment.” The Supreme Court pointed out that “[s]worn testimony in judicial proceedings is a quintessential example of speech as a citizen for a simple reason: Anyone who testifies in court bears an obligation, to the court and society at large, to tell the truth.” The Court concluded: “That independent obligation renders sworn testimony speech as a citizen and sets it apart from speech made purely in the capacity of an employee.”

In a footnote, the Court left open the question of whether the Garcetti “official duties” rule would nevertheless apply to a public employee who does in fact testify in court as part of his or her ordinary job responsibilities. The court described: “We accordingly need not address in this case whether truthful sworn testimony would constitute citizen speech under Garcetti when given as part of a public employee’s ordinary job duties, and express no opinion on the matter today.”

Three of the Court’s Justices signed a concurring opinion that further developed this point that the Court did not reach the issue of protection for public employees who testify as part of their ordinary job duties. The concurring opinion, written by Justice Thomas, cited “police officers, crime scene technicians, and laboratory analysts” as examples of employees for whom

“testifying is a routine and critical part of their employment duties.” The concurring opinion also cited as potentially outside the scope of the Lane holding individuals designated to testify as representatives of their employer in litigation, and indicated that the Court had not yet evaluated constitutional protection for this type of testimony.

The Court’s opinion also emphasized that the testimony by Lane concerning the corruption of a public official clearly met a separate element of the test for whether a public employee can prevail on a First Amendment claim, in particular the requirement that the employee speak on a matter of “public concern.”

The Court addressed a second principal issue, whether, even though Lane’s speech was protected, individual administrators such as Franks nevertheless are protected by the doctrine of qualified immunity from having to pay damages. Qualified immunity protects government officials from individual liability if the constitutional right they violated was not “clearly established” at the time. The Supreme Court found that, because the state of the law in the Eleventh Circuit was not clear at the time the college President Franks made the decision to fire Lane, the President was entitled to qualified immunity for any claim for damages. The Court held, however, that Lane’s separate non-damages claim against another administrator could proceed, and remanded the issue for further proceedings.

Lane v. Franks (2014) 134 S.Ct. 2369.

RETIREMENT

Court Rules That ‘37 Act Employers Retain the Right to Discontinue Paying Employee Member Contributions After PEPRA. In 2013, the County of San Bernardino unilaterally implemented terms and conditions of employment after satisfying all meet and confer obligations with the San Bernardino County Public Attorneys Association (SBCPAA), a labor organization. Those terms included eliminating the County’s pick-up of a portion of its employees’ member contributions to the county retirement system.

SBCPAA challenged this action by filing a petition for writ of mandate in San Bernardino County Superior Court, arguing that a statute enacted as part of the California Public Employees’ Pension Reform Act of 2013 (PEPRA) actually required the County to continue the pick-ups absent the employees’ agreement to the change. The State of California, the California State Association of Counties, and the California Special Districts Association filed Amicus Curiae briefs. On April 11, 2014, the Court denied SBCPAA’s petition for writ of mandate, finding the County maintained the unilateral right to discontinue picking-up the member contributions of its employees after exhausting all collective bargaining obligations.

Government Code section 31631 of the County Employees’ Retirement Law of 1937 (’37 Act), enacted as part of PEPRA, states, in relevant part, “Notwithstanding any other law, a board of supervisors or the governing body of a district may, …without a change in benefits, require that members pay all or part of the contributions of a member or employer, or both, for any retirement benefits …For members who are represented in a bargaining unit, the payment requirement shall be approved in a memorandum of understanding…”

The intent of this statute is to provide an avenue for employees to share a part of the employer’s contribution rate, provided employees agree in a memorandum of understanding. SBCPAA argued, however, that this statute also requires agreement of employees to pay any contributions, including their own normal member contributions.

The Court found that the plain language of section 31631 requires employee agreement to pay any member contributions, including their own normal member contributions. However, the Court noted that this part of the statute is completely inapposite to other parts of the ’37 Act, the intent of PEPRA, and the intent of the Meyers-Milias-Brown Act (MMBA). Moreover, the Court found that section 31631 was unconstitutional under the California Constitution.

Prior to PEPRA, section 31581.2 of the ’37 Act permitted employers to pick-up all or a portion of the member contributions of its employees and to discontinue doing so at any time after exhausting all meet and confer obligations under the MMBA. Section 31581.2 was never repealed as part of PEPRA or any time after PEPRA. Further, the intent of PEPRA is to ensure public pension systems are sustainable. Among its provisions, PEPRA prohibits employers from picking up the contributions required of “new members,” discourages employers from doing the same for classic members, and encourages all employees to share a portion of the employer’s normal cost to fund pension benefits.

The Court observed that the overall statutory schemes of the ’37 Act, PEPRA and MMBA did not grant labor organizations the unilateral power to compel employers to continue to pick up employee contributions by simply refusing to agree to pay their own normal contributions to the retirement system.

More importantly, the Court found that because the plain, clear language of section 31631 requires employee agreement in a memorandum of understanding in order for them to pay their own normal member contributions, section 31631 is unconstitutional as a violation of the “Home Rule” Doctrine as set forth in Article XI, Sections 1 and 11 of the California Constitution. Under the Home Rule Doctrine, the board of supervisors of any county has the sole authority to determine the compensation of its employees and to control county money. The California Supreme Court previously held that the Legislature may not enact a law that places the authority in another person or entity to determine the compensation of county employees. The San Ber- nardino County Superior Court found that section 31631 did just this.

The Court also rejected SBCPAA’s argument that employer pick-ups are a constitutionally- protected “vested” right. The law is clear that employer pick-ups of employee member

contributions are an employment benefit, not a retirement benefit and as such, are not vested and constitutionally protected post-employment benefits.

San Bernardino County Public Attorneys Assn. v. County of San Bernardino, et. al., Case No. CIVDS1304516.

WORKERS’ COMPENSATION

Court of Appeal Affirms Workers’ Compensation Appeals Board’s Finding of Fact That Correctional Officer Driving Home After Second Shift Was Not On Special Mission. Lieutenant Seth Patrick Lantz worked as a correctional officer at the Pleasant Valley State Prison in Coalinga. Because Lantz lived in the Bakersfield area, his one-way commute to the prison was over 85 miles. Lantz’s regular shift ran from 2:00 p.m. to 10:00 p.m., during which he worked as a program lieutenant in charge of the A Yard and was responsible for approximately 800 to 1,000 inmates.

The State Department of Corrections and Rehabilitation and the correctional officers’ union have an agreed upon procedure for selecting a watch commander replacement when one is needed. The shift is first offered to qualified officers in order of seniority. If no one volunteers, the shift is assigned in reverse order of seniority. The assigned officer is required to work the overtime shift except in emergency situations. The watch commander is responsible for all 4,000 to 5,000 inmates at the prison.

On October 1, during Lantz’s regularly scheduled shift, he was informed that he would need to “hold over” and serve as the watch commander for the next shift, which ran from 10:00 p.m. to 6:00 a.m. Lantz, who had served as watch commander before, was assigned the hold-over shift in accordance with the reverse seniority procedure because no one had volunteered to take the shift. On October 2, at approximately 6:20 a.m., while driving home in his personal vehicle after the hold-over shift, Lantz was killed in an automobile accident. According to the Department, employees are not paid for their commuting time, are not required to own personal vehicles, and are advised to remove or cover up their uniforms when commuting.

Lantz’s widow applied for workers’ compensation benefits on behalf of herself and her four children, contending that Lantz was killed during the course of his employment. A trial was held before a Workers’ Compensation Administrative Law Judge (ALJ), who concluded that Lantz sustained an injury arising out of and in the course of his employment resulting in his death. The Workers’ Compensation Appeals Board (WCAB) rescinded the ALJ’s findings of fact and concluded that Lantz’s death did not arise out of and in the course of his employment. Lantz’s widow filed a petition for writ of mandate with the Court of Appeal, which affirmed the WCAB’s findings.

In order for an employer to be liable for workers’ compensation benefits for the injury or death of an employee, the employee must have been acting within the course of employment at the time of the injury. Under the “going and coming rule,” an employee is not covered by workers’ compensation for injuries occurring while the employee is commuting to or from work absent special or extraordinary circumstances.

Included within the scope of “special or extraordinary circumstances” is the special mission exception, which provides that an injury suffered by an employee during the regular commute is compensable if the employee was performing a “special mission.” The special mission exception requires that the activity be (1) extraordinary in relation to the employee’s routine duties, (2) within the course of the employee’s employment, and (3) undertaken at the request of the employer and for the employer’s benefit. In order to determine whether an activity is “extraordinary,” courts generally consider the location, timing, and nature of the tasks included in the activity.

The parties disputed whether Lantz’s activity was extraordinary, and the WCAB determined that it was not extraordinary for Lantz to be held over, nor was it special or remarkable for him to serve as watch commander.

Before the Court of Appeal could evaluate the WCAB decision, it had to determine what standard of review to apply. Pursuant to Labor Code section 5953, courts review WCAB findings of fact for substantial evidence, a liberal standard of review, while they subject WCAB determinations of law to a more rigorous independent review. The parties disputed which standard the Court should apply.

In order to determine whether the WCAB resolved an issue of fact or law, the Court evaluated the evidence in the context of whether Lantz was engaged in an “extraordinary” activity. The first factor, the location of the extra work, presented no conflicting inferences of fact. The evidence showed that Lantz worked the hold-over shift at the prison, his usual place of employment. As for the second factor, the timing of the extra work, Lantz was required to work full, back-to-back shifts, and the doubling of an employee’s workday could be considered extraordinary. However, Lantz was not required to make an extra trip in order to work the second shift, and working an occasional second shift is a mandatory part of being a correctional officer. Thus, the second factor presented conflicting inferences. The third factor, the nature of the duties performed during the hold-over shift, also presented conflicting inferences. According to the testimony at trial, Lantz was either required to supervise 33 percent more employees than normal, or 40 percent fewer. While it was undisputed that Lantz had to supervise five times as many prisoners as normal, it was also reasonable to conclude that this was no more demanding than normal because he was supervising the inmates during the night shift, when activity decreases.

In other words, in order to reach its decision, the WCAB had to choose between conflicting inferences presented from the evidence at trial and decide how much weight to give each inferred

fact. These two analytical steps are associated with deciding questions of fact, not law. Thus, the Court held that the WCAB made findings of fact, which should only be reviewed for substantial evidence.

The Court then held that the testimony of two Department employees (a lieutenant and a captain) regarding the operation of the prison and the duties of a lieutenant and a watch commander constituted substantial evidence in support of the WCAB’s finding of fact that the hold-over shift as watch commander was not an extraordinary activity for Lantz, and he was not on a special mission at the time of his death. Thus, the Court affirmed the WCAB’s decision that Lantz did not sustain an injury resulting in death arising out of and in the course of his employment with the Department.

Lantz v. Workers’ Compensation Appeals Board (2014) 171 Cal. Rptr.3d 829.

LITIGATION

Court Should Have Granted Board Members’ Anti- SLAPP Motion in Response to Lawsuit Arising Out of Members’ Conduct at Board Meeting. Kensington, an unincorporated community north of Berkeley, maintains its own police department through the Kensington Police Protection and Community Services District, which is governed by a Board of Directors. The Board, consisting of five members, sets the salary for the combined position of General Manager/Chief of Police, currently held by Greg Harman. Harman’s prior contract expired on June 30, 2012.

The notice of agenda posted in advance of the July 12, 2012, Board meeting stated that Harman’s salary compensation package for the July 1, 2012 – June 30, 2014 contract period would be discussed and possibly acted upon. At the July 12 meeting, the Board began discussing Harman’s salary compensation package at approximately 7:45 p.m. According to the Board’s Policy and Procedures Manual, meetings should be adjourned at 10:00 p.m. unless extended by a four-fifths vote. At approximately 9:45 p.m., the Board voted on whether to extend the meeting, resulting in a three-to-two vote in favor of extension. The meeting continued. At 10:00 p.m., all five Board members voted in favor of extending the meeting without a time limitation. At the conclusion of the meeting, three of the five Board members voted in favor of offering Harman an increased base salary of $148,441 for the new contract period, as well as a $16,754 retention and merit bonus.

Later that year, eight individuals filed a petition for writ of mandate, alleging that the Board had failed to give proper advance notice of the business items to be discussed at the July 12 meeting. They also alleged that the Board impermissibly extended the meeting after failing to secure the four votes required to extend the meeting past 10:00 p.m. These petitioners sought an order directing the Board to vacate its vote to increase Harman’s compensation package, as well as an

order to enjoin the merit bonus payment and a declaration that the vote to increase Harman’s salary was unlawful. The Board and the three Board members named in the petition filed a special motion to strike the amended petition, also called an anti-SLAPP motion. The court denied the motion, and the Board and individual members appealed. The Court of Appeal reversed and remanded.

Pursuant to the anti-SLAPP statute (Code of Civil Procedure section 425.16), a claim brought against a person arising from any act of that person in furtherance of his or her right of petition or free speech in connection with a public issue is subject to a special motion to strike unless the court determines that the claimant establishes a probability he will prevail on his claim. The goal of the anti-SLAPP statute is to eliminate meritless or retaliatory litigation at the early stage of the proceedings. To determine whether a lawsuit is subject to the special motion to strike, the court evaluates whether the challenged claim arose from protected activity and whether the plaintiff has a reasonable probability of prevailing on the merits.

Before the Court engaged in this analysis, it first determined whether the petitioners’ lawsuit fell within Code of Civil Procedure section 425.17, the public interest exception. If it did, the trial court could deny the anti-SLAPP motion without performing the two-step analysis described above. Section 425.17 provides that the anti-SLAPP statute does not apply (and thus a claim is not subject to an anti-SLAPP motion), if all of the following factors are met: (1) the plaintiff does not seek any relief greater than or different from the relief sought for the general public; (2) the action, if successful, would enforce an important right affecting the public interest, and would confer a significant benefit, whether pecuniary or nonpecuniary, or the general public or a large class of persons; and (3) private enforcement is necessary and places a disproportionate financial burden of the plaintiff in relation to the plaintiff ’s stake in the matter.

In this case, the Court of Appeal held that Section 425.17 did not apply because the petitioners’ claims did not operate to enforce an important right affecting the public interest. While the petitioners argued that they were enforcing the open meetings act, the Brown Act, this statute had no application in this case because the Board was not required to post meeting agendas 72 hours in advance of regular meetings for the 2012-2013 budget year. Further, the third factor was not met because private enforcement was not necessary as to the three individually named Board members. If the petitioners sought to challenge the validity of Harman’s compensation package, they could have sued the District alone. The fact that they chose to sue individuals indicates a motive to intrude upon the First Amendment rights of the individual Board members. Therefore, the public interest exception did not apply, and the Court was required to conduct the standard anti-SLAPP analysis.

The Court looked to the gravamen of the petitioners’ complaint to determine whether the claim was triggered by protected activity. The petitioners essentially claimed that the three Board members had violated Board policy by voting in a manner inconsistent with Board policy to extend the July 12 meeting, and by discussing and voting on a matter (the retention bonus) that was not properly noticed. They were not sued because they voted, but because of how they voted and expressed themselves at the Board meeting. Therefore, they engaged in protected conduct.

However, the Court limited its holding to the individual Board members. The Board itself, as a public agency, does not necessarily engage in protected activity by making or issuing decisions.

The Court then held that the petitioners had not shown a probability of prevailing on their claims. While the petition alleged that the Board violated its Procedures Manual by continuing the meeting after 10:00 p.m. on only a three-two vote in favor of doing so, the petition failed to mention that the Board unanimously voted at 10:00 p.m. to extend the meeting. The petition also alleged that the Board failed to notice the substance of the July 12 meeting properly because the agenda did not mention that the Board would consider awarding Harman a retroactive pay increase for his prior contract. However, this “retroactive” payment was in fact an element of his salary compensation package for his new contract, which the agenda satisfactorily identified. Thus, the petitioners had failed to show a probability of prevailing on their claims, and the trial court should have granted the anti-SLAPP motion.

While the holding technically only applied to the individually-named Board members and not the Board itself, the Court noted that the “viability of the instant suit is questionable at best.”

Schwarzburd v. Kensington Police Protection & Community Services District Board (2014) 225 Cal.App.4th 1345.

Party Who Received Settlement Payment in Exchange for Dismissing Certain Claims Was Prevailing Party for Purposes of Recovering Costs. Community Hospital of the Monterey Peninsula hired Maureen deSaulles in February 2005 as a part-time patient business services registrar. deSaulles began complaining about her work shift assignments to the emergency room. The Hospital placed deSaulles on a leave of absence the following January and terminated her employment in July 2006.

deSaulles filed a complaint alleging (1) failure to accommodate her physical disability or medical condition; (2) retaliation in violation of the Fair Employment and Housing Act (FEHA); (3) breach of implicit conditions of an employment contract; (4) breach of an implied covenant of good faith and fair dealing; (5) negligent infliction of emotional distress; (6) intentional infliction of emotional distress; and (7) wrongful termination in violation of public policy.

The trial court denied the Hospital’s motion for summary judgment, but granted its motion for summary adjudication as to the claim of failure to accommodate. The parties later placed their settlement agreement on the record, pursuant to which deSaulles would agree to dismiss her claims of breach of contract and breach of covenant in exchange for $23,500. The court also granted some of the Hospital’s pre-trial motions, thus precluding deSaulles from offering evidence at trial of the Hospital’s failure to accommodate her disability or to engage in the interactive process, or that deSaulles was harassed, discriminated, or retaliated against. The trial court then entered judgment, stating that, in light of its rulings on the pre-trial motions, deSaulles would be unable to introduce any evidence that would establish her claims of retaliation, negligent or intentional infliction of emotional distress, or wrongful termination. The court had

already adjudicated deSaulles’ failure to accommodate claim in favor of the Hospital, and the parties had already settled the remaining claims. Thus, the court concluded that deSaulles would recover nothing from the Hospital, and ordered that the parties defer seeking recovery of costs and fees until after the time for all appeals. deSaulles appealed, but the Court of Appeal affirmed the judgment in an unpublished opinion.

Both parties filed memoranda seeking costs, and deSaulles filed a motion to strike the Hospital’s memorandum on the basis that the Hospital was not the prevailing party. The trial court ruled that the Hospital was the prevailing party, and awarded costs of approximately $12,700. deSaulles appealed, and the Court of Appeal reversed.

Unless otherwise provided by statute, the prevailing party is entitled to recover costs as a matter of right. “Prevailing party” is defined as including: (1) the party with the net monetary recovery; (2) a defendant in whose favor a dismissal is entered; (3) a defendant where neither plaintiff nor defendant obtains any relief; (4) a defendant as against those plaintiffs who do not recover any relief against that defendant. If none of the situations listed above occur, the trial court determines the prevailing party and uses its discretion to determine the amount and allocation of costs.

The Court of Appeal here addressed the novel question of whether “net monetary recovery” includes amounts received through settlement. It relied on a previous case to determine that “net monetary recovery” is broad enough to include an amount of money obtained either by a favorable judgment or otherwise by the legal process. In this case, the parties agreed on the day of trial to settle two causes of action, and they stipulated to the settlement orally before the court. Thus, this settlement was accomplished through the legal process. deSaulles ultimately received $23,500. The Court held that this settlement fell within the definition of “net monetary recovery,” and therefore the trial court should have found that deSaulles was the prevailing party.

The Hospital argued that it was the prevailing party because it was a “defendant in whose favor a dismissal is entered.” However, the Court’s review of the record disclosed that the trial court never entered a judgment expressly dismissing the action. The trial court summarily adjudicated deSaulles’ retaliation claim, but never purported to dismiss it. The trial court’s order granting the Hospital’s pre-trial motions also did not purport to dismiss the remaining claims. A ruling should not be regarded as a dismissal unless it reflects an explicit or implicit intent to dismiss an action or claim. While the court issued an order stating that deSaulles was to “recover nothing” from the Hospital, this order appeared to facilitate appellate review of the earlier rulings and did not reflect an intent to dismiss the action.

Further, while deSaulles dismissed two causes of action in exchange for her settlement payment, the Court held that it only makes sense to mandate costs for a dismissal when the dismissal ends the action against a defendant and not when a voluntary dismissal leaves the plaintiff with pending claims against that defendant. At most, the Hospital obtained a partial voluntary dismissal.

Thus, the Court of Appeal held that the Hospital was not a prevailing party. If it were a prevailing party and the trial court was therefore faced with a situation in which there were two prevailing parties, it could have exercised its discretion and determined which party prevailed based on the merits of the case. However, only one party fit the definition of prevailing party, and thus the statute operated mechanically to mandate costs and did not afford the trial court any discretion.

Thus, the Court of Appeal reversed the trial court’s order awarding costs to the Hospital. deSaulles v. Community Hospital of the Monterey Peninsula (2014) 225 Cal.App.4th 1427.

SEVERANCE PAYMENTS

Court Erred by Finding That Severance Payments Were Not Taxable Wages for Purposes of Filing and Withholding Federal Insurance Contributions Act Taxes. In 2001, Quality Stores, Inc. entered bankruptcy proceedings. Before and during this process, Quality Stores terminated thousands of employees. The terminated employees received severance payments according to one of two different termination plans. Under the first plan, employees received severance pay based on their job grade and management level. Under the second plan, officers received between six and twelve months of severance pay, and employees who had worked for at least two years received one week of severance pay for every year of service, up to a stated maximum.

Quality Stores reported the severance payments as wages on W-2 tax forms, paid the employer’s required share of the Federal Insurance Contributions Act (FICA) taxes, and withheld the employees’ share of FICA taxes. It then filed for a refund of $1,000,125 in FICA taxes on behalf of itself and its former employees. The Internal Revenue Service (IRS) neither allowed nor denied the claim, and Quality Stores initiated a proceeding in Bankruptcy Court to recover the disputed amount. The Bankruptcy Court granted summary judgment in Quality Stores’ favor, and the district court and Court of Appeals for the Sixth Circuit affirmed, concluding that the severance payments were not “wages” under FICA. The United States appealed, arguing that the FICA taxes must be withheld, and the United States Supreme Court agreed.

FICA taxes any “wages” paid by an employer or received by an employee “with respect to employment” in order to fund benefits provided by the Social Security Act and Medicare. FICA defines “wages” as “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.”

The Court held that, as a matter of plain meaning, severance payments made to terminated employees are “remuneration for employment.” Severance payments are only made to employees, and are made in consideration for services performed by the employee. They often

vary, as they did in this case, according to the function and seniority of the terminated employee. FICA also specifically exempts from taxable wages any severance payments made “because of…retirement for disability.” The Court reasoned that this exemption would be unnecessary if FICA’s definition of “wages” did not include severance payments.

The Court then addressed the issue of whether section 3402(o) of the Internal Revenue Code related to income tax withholding is a limitation on the meaning of “wages” for FICA purposes. The Court held that it is not.

Section 3402(o) provides that supplemental unemployment compensation benefits (SUBs) paid to an individual “shall be treated as if it were a payment of wages by an employer to an employee for a payroll period.” Assuming that severance payments are SUBs, Quality Stores argued that if SUBs are supposed to be treated “as if” they were wages for purposes of income tax withholding, then they cannot be wages. Otherwise, the statute would be redundant. The Court disagreed, noting that the FICA definition of “wages” and the Internal Revenue Code definition of “wages” for purposes of income tax withholding are broad, highly-similar, and contain certain exemptions. Severance payments are not exempted from either definition of “wages.” Further, the statute is not redundant because Congress added it to the Internal Revenue Code in order to address a specific problem that is not at issue in this case.

Thus, the Court reversed the decision of the Court of Appeals for the Sixth Circuit and held that the severance payments Quality Stores provided to its employees are taxable wages under FICA.

United States v. Quality Stores, Inc. (2014) __ S.Ct. __ [2014 WL 1168968].

This page left intentionally blank.

360

Speaker Biographies

361 Notes:______

362 Toussaint S. Bailey Toussaint Bailey specializes in high-stakes, complex civil litigation on behalf of municipalities and public agencies. His cases span a wide range of public law issues, including all aspects of land use and planning, constitutional law, fair housing, construction, environmental law, and telecommunications. Before joining Richards, Watson & Gershon as a first-year associate in 2007, Mr. Bailey attended UCLA School of Law and worked in the Los Angeles City Attorney's office. He is based in the firm's San Francisco office.

363 Jeffrey S. Ballinger Jeffrey S. Ballinger is a partner with Best Best & Krieger LLP and leader of the firm's Municipal Law practice group. Mr. Ballinger’s practice areas include municipal law, planning and zoning, environmental and natural resources law. He currently serves as city attorney for the cities of Fontana and San Jacinto, and assistant city attorney for the City of Big Bear Lake. In addition to his city attorney work, Mr. Ballinger also serves as general counsel to the Chino Valley Independent Fire Protection District as well as the Valley-Wide Recreation and Park District. Mr. Ballinger has represented both cities and special districts in court, at public meetings and in the course of complex transactions. He frequently advises cities and other local governmental agencies on the Brown Act, the Political Reform Act and the Public Records Act. Mr. Ballinger also has experience in housing and development-related areas of the law, including the Planning and Zoning Law, the Subdivision Map Act and state and federal housing laws. In addition, he has successfully defended land use and CEQA challenges to his public agency clients, both at the trial and appellate levels. Mr. Ballinger currently serves on the League of California Cities Environmental Quality Committee and Legal Advocacy Committee. Mr. Ballinger received his undergraduate degree in Sociology/Law & Society from the University of California, Riverside. He received his Juris Doctorate degree at the USC School of Law. While there, he participated in the Post-Conviction Justice Project and was a staff member and article editor for the Southern California Law Review.

364 Steven M. Berliner Steven is partner with Liebert Cassidy Whitmore in its Los Angeles Office. He is Chair of the firm's Retirement Practice Group. His specializes in PERS law, the County Employees Retirement Law of 1937 and labor relations. Steve acts as chief negotiator for many public agencies. Steve earned his law degree from UCLA.

365 James “Jeb” E. Brown James E. "Jeb" Brown is a Riverside native who graduated from Cal State University, San Bernardino with a Bachelor of Science in Political Science in 1989. He obtained his Juris Doctor from the McGeorge School of Law, University of the Pacific in 1992. He is licensed to practice law before all of the Courts of the State of California as well as the United States District Court, Central District of California, Southern District of California, Ninth Circuit Court of Appeals, and the United States Supreme Court. In August 2002, he became the Supervising Deputy City Attorney at the Riverside City Attorney’s Office. Jeb currently supervises five attorneys, one legal assistant and two legal secretaries. In addition to supervising the Litigation Services Section, Jeb also serves as the Legal Advisor to Public Safety (Police and Fire), provides advice on employment issues and represents the City and its employees in both state and federal court. Jeb regularly provides training on various legal issues to the Riverside Police Department. He has also provided training to the Riverside County District Attorney’s Office, the Association of Southern California Defense Counsel and the League of California Cities. Jeb was a member of the 2005 Leadership Riverside class. He has chaired Law and Justice Day since 2007 and has served on the Steering Committee for Leadership Riverside since 2008. Jeb is a Past President and board member of the Leo A. Deegan Inn of Court and current President of the Federal Bar Association . He is an adjunct professor at the University of Laverne School of Law (Civil Rights, Federal Courts and Conflict of Laws). Jeb was a former Lawyer Representative to the Central District of California and is currently serves the Federal Court as an Attorney Settlement Officer and as a member of the Local Rules Advisory Committee. Finally, Jeb is a mentor to at-risk youth at North High School.

366 Allison E. Burns Represented City in Challenge to Wal-Mart Store Represented the City of Rialto in California Environmental Quality Act challenge to proposed Wal-Mart store. Represented City in Challenges to City's Housing Element Represented city, redevelopment agency, and housing authority in challenge brought by former occupants of property acquired for economic development to the city’s Housing Element, Relocation Plan, and Replacement Housing Plan. Represented Community Services District in CEQA Challenge Represented community services district in California Environmental Quality Act challenge to proposed signal and community entrance improvements on Pacific Coast Highway. Defended School Districts in Contract Litigation Represented two school districts in litigation against former redevelopment agency for failure to make payments pursuant to tax increment pass-through agreement. Defended City in Constitutional Challenge to Legislative Invocation Policy Defended city in a challenge filed in federal district court and appealed to the 9th Circuit alleging that the city’s policy of allowing all denominations to provide an invocation consistent with their beliefs at the beginning of city council meetings violated the United States and California Constitutions. Defended City in Federal Civil Rights Litigation Defended city in connection with a federal civil rights lawsuit, an investigation and administrative complaint by U.S. Department of Housing and Urban Development (HUD), and an investigation by the U.S. Department of Justice (DOJ) related to claims of racial discrimination in connection with the enforcement of the federal rules governing the Section 8 program within city. Defended Redevelopment Agency and City in Foreclosure Litigation Defended redevelopment agency in state and federal litigation relating to foreclosure of real property owned by nonprofit corporation, claims of interference by city and redevelopment agency and various tort and fraud claims.

367 Shahiedah S. Coates Shahiedah Coates is an Associate with Jenkins & Hogin, LLP, where she advises many of the firm’s clients on matters related to land use, election law, assessments, and other legal issues associated with municipal law practice. She recently conducted research in support of The Decline of the Community Care Model: the Rise of the Rehab Riviera(s) by Christi Hogin, presented at the May 2014 California Contract Cities Conference. Additionally, Ms. Coates represents many of the firm’s clients in litigation and employment claims, and she advises the firm’s nonprofit clients, which include such the Harbor Community Benefit Foundation and Lomita Railroad Museum Foundation. Prior to joining Jenkins & Hogin, Ms. Coates was a Deputy County Counsel in Los Angeles County, where she gained significant experience in redevelopment dissolution, municipal finance, and property tax law. In this role, Ms. Coates occasionally provided advice on the Brown Act, Public Records Act, and religious practices. Her efforts were recognized by the Los Angeles County Board of Supervisors in 2013. Before joining County Counsel, Ms. Coates provided legislative advocacy and community development assistance as a consultant to a Southern California city and school district, and completed an internship with the Long Beach City Prosecutor’s Office. Ms. Coates received her Bachelor of Science in Political Science from Florida Agricultural & Mechanical University, her Master’s in Business Administration from Woodbury University, and her Juris Doctor from Harvard Law School.

368 Barbara Cook Barbara J. Cook, P.E., is the Division Chief for the Department of Toxic Substances Control's Brownfields and Environmental Restoration Program (Cleanup Program). In this position, Ms. Cook provides guidance for the investigation and cleanup of contaminated sites throughout California. Ms. Cook is a registered civil engineer in the state of California with extensive experience in the state and federal Superfund cleanup programs and in Brownfields redevelopment. She has worked for DTSC for 28 years.

369 Andrew L. Faber Andy Faber is a partner at Berliner Cohen in San Jose, and has been practicing land use and municipal law for 40 years. He is Acting City Attorney for Gilroy and has served as special counsel to many public entities, as well as representing private developers. He is currently representing the City of San Jose in CBIA v. City of San Jose, a California Supreme Court Case challenging the validity of San Jose's inclusionary housing ordinance. He received his J.D. from Stanford Law School.

370 Michael N. Feuer Los Angeles City Attorney Mike Feuer has long been one of California's leading lawyers and lawmakers. He has brought a collaborative, problem-solving focus to the City Attorney's office, emphasizing quality of life improvements in L.A.'s neighborhoods. Already Feuer is expanding the Neighborhood Prosecutor Program, leading efforts to prevent gun violence, developing innovative approaches to gang violence, domestic abuse and school safety, and aggressively pursuing environmental justice and other efforts to protect vulnerable Angelenos. Feuer previously served as the Majority Policy Leader of the California Assembly and Chair of the Assembly's Judiciary Committee, writing many of California's most important public safety, children's health, transportation, consumer protection and environmental laws. Feuer jointly-authored the Homeowners' Bill of Rights and the Iran Contracting Act. He wrote the Crime Gun Identification Act and the Sargent Shriver Civil Counsel Act, as well as the nation's most comprehensive law to remove cancer-causing chemicals from consumer products, the law requiring insurance companies to insure children with pre-existing conditions, the law authorizing L.A. County's transformative transportation initiative, Measure R, and much more. As a Los Angeles City Council member, Feuer chaired the Budget and Finance Committee, delivering on-time, balanced budgets, fighting successfully for anti-gang and after-school programs, jobs for disadvantaged youth and meals for indigent seniors. Feuer wrote some of America's toughest laws to curb gun violence, initiated L.A.'s 3-1-1 non-emergency services system and spearheaded ethics and business tax reforms. A champion for senior citizens, Feuer served as Executive Director of Bet Tzedek Legal Services, one of the nation's leading public interest law firms. Under Mike's leadership, Bet Tzedek helped more than 50,000 indigent, primarily elderly or disabled clients on crucial cases involving nursing home abuse, consumer fraud, access to health care, housing, Holocaust restitution and more. The Los Angeles Daily Journal wrote that Feuer turned Bet Tzedek into a "national success story." The recipient of dozens of awards for his achievements for seniors, children, environmental protection, gun violence prevention, access to justice, transportation improvements, civil rights, education reform and more, Feuer has taught at the UCLA School of Law and the UCLA School of Public Affairs. He practiced law at two prominent firms, Hufstedler, Miller, Carlson & Beardsley and Morrison & Foerster, and was a commentator on NPR member station KPCC. He began his career as a judicial clerk for California Supreme Court Justice Joseph Grodin. Feuer is a Phi Beta Kappa, magna cum laude graduate of Harvard College and a cum laude graduate of Harvard Law School. He and his wife, Gail Ruderman Feuer, have been married for thirty years and have two children, Aaron and Danielle.

371 Leah S. Goldberg Leah Goldberg specializes in re-use and redevelopment of contaminated properties. She has worked with developers, responsible parties, cities and regulators to develop brownfields agreements and strategies. In addition, Leah practices general environmental and land use law with an emphasis on clean water, underground storage tanks, stormwater and wastewater permits, hazardous substances and wastes, California Environmental Quality Act (CEQA) compliance, land use entitlements, Endangered Species Act issues, and Section 404 Wetlands permits. She currently serves as Senior Deputy City Attorney for the City of San Jose. Prior to joining San Jose's legal team, Leah was instrumental in helping to draft and pass AB 440. Leah is admitted to practice in California, Colorado and the District of Columbia.

372 Eugene P. Gordon Eugene P. Gordon is a Deputy City Attorney in the San Diego City Attorney's Office. Since February 2008 when he retired from the City, he has been working as a volunteer on a part-time basis in the City Attorney’s Office. He is assigned to the Trial Unit in the Civil Division where he specializes in the defense of personal injury cases brought against the City and its employees. Such litigation involves alleged dangerous conditions of public property, such as highway design and trip-and-fall cases, police K-9 bite cases, false arrest and excessive force cases, including section 1983 cases, and City vehicular accidents. From 1971 to 1978, Mr. Gordon was Legal Advisor to the San Diego Police Department where he was instrumental in providing legal in-service training programs, including the publication of legal training bulletins for police officers. He provided on-the-scene legal advice to police supervisors in the proper handling of civil demonstrations and disturbances, was available to supervisors and officers in the field for consultation on legal matters, and played an important role in drafting legal policies and procedures. While Police Legal Advisor, Mr. Gordon was a member of the Legal Officers Section of the International Association of Chiefs of Police, and in 1976 he was General Chairman of the section. He was also a contributor to the “Chief's Counsel,” a legal column in the “Police Chief Magazine,” a monthly publication of the International Association of Chiefs of Police. Mr. Gordon was a prosecutor in the Criminal Division of the City Attorney's Office from 1969 - 1971 where he prosecuted a variety of misdemeanor cases. He served as Assistant Chief Criminal Deputy for one year prior to becoming Police Legal Advisor in May 1971. Mr. Gordon has taught extensively at the San Diego Regional Public Safety Training Institute at Miramar College in San Diego on the subjects of civil and criminal liability of law enforcement officers, constitutional law, and use of force to police recruits, advanced officers and Field Training Officers. He was an instructor in the San Diego Sheriff's Department Academy at Southwestern College on the subject of civil and criminal liability of law enforcement officers, and he taught the sixteen-hour course on search and seizure at the San Diego Police Academy from 1972-1979. Mr. Gordon has lectured at numerous seminars for police administrators sponsored by the International Association of Chiefs of Police on the subjects of police discipline, civil liability and discovery of police officers' personnel records. He has also lectured on municipal tort liability at NIMLO and League of California Cities conferences. Mr. Gordon has provided legal updates at numerous PRIMA and PARMA conferences. In 1992, Mr. Gordon served on the California Commission on Peace Officer Standards and Training (POST) Committee on “Police Use of Force,” Executive Report, July 1992. In 1996, he assisted POST in revising the Police Supervisory Course curricula. Admitted to the California State Bar in 1968, Mr. Gordon received his legal education at Hastings College of Law in San Francisco. He received his B.A. degree from the University of California, Riverside.

373 Rick W. Jarvis A founding partner of the Jarvis Fay law firm, Rick Jarvis is one of California's leading CEQA, land use, and municipal law litigators, having handled over 100 cases in his over 20 years of practice. Rick primarily represents cities and other local public agencies in state and federal courts, at both the trial and appellate levels. Rick also advises cities on development and other land use matters, including bullet-proofing CEQA documentation. Rick graduated from U.C. Berkeley's Boalt School of Law in 1991.

374 Shawn M. Mason Shawn Mason has served as the City Attorney for the City of San Mateo since January 2003. Shawn previously served as the City Attorney for the City of Rancho Mirage and the City of Benicia, and as the Deputy and Assistant City Attorney for the City of Thousand Oaks. Shawn presently serves on the Legal Advocacy Committee and as Chair of the FPPC Committee. He has previously served on the Municipal Law Handbook Committee. In his spare time, Shawn enjoys running, playing softball and reading. He is also an enthusiastic fantasy baseball team owner and enjoys annually competing with fellow city attorneys, Fred Soley and John Pomidor.

375 Michael H. Roush Michael was the City Attorney for the City of Pleasanton where he served for 21 years, "retiring" in 2009. He now serves as an interim Assistant City Attorney for the City of Stockton and does some contract work for other public agencies.

376 Danielle G. Sakai Danielle Sakai is a partner in the Environmental Law & Natural Resources and Litigation practice groups of Best Best & Krieger LLP. Ms. Sakai’s practice focuses on environmental contamination, land use and real property matters. She has significant litigation experience and is involved in one of the State’s most contentious superfund sites involving the Rialto/Colton Groundwater Basin. Ms. Sakai represents both public and private entities in State and Federal Courts. Ms. Sakai also has experience representing public and private clients before State and Local regulatory agencies, including the State Water Resources Control Board, the Regional Water Quality Control Boards, the Department of Toxic Substances Control, the Air Resources Board and the Department of Public Health, regarding environmental issues including the remediation of hazardous substances, leaking underground storage tanks, and air and water quality regulations and compliance. Ms. Sakai advises both public and private clients regarding the Environmental Due Diligence process and works closesly with environmental consultants, lenders and where appropriate, regulators to ensure a successful acquisition. Ms. Sakai authored featured articles for the California Land Use Law & Policy Reporter, the Climate Change Law & Policy Reporter and is an Editorial Board member of the Environmental Liability, Enforcement & Penalties Reporter. Ms. Sakai earned a Bachelor of Art degree in History and Law & Society from the University of California at Riverside in 1997. She received her Juris Doctorate from Loyola Law School in 2000. Ms. Sakai is a member of the State Bar of California and is admitted to practice before the United States District Court for the Central and Northern Districts of California and the Ninth Circuit Court of Appeals.

377 Kevin D. Siegel Kevin represents cities and other local agencies regarding a wide range of public law matters, including taxes and assessments, land use and planning, CEQA and environmental law, eminent domain, public records, elections, tort claims, and constitutional law. Kevin provides both litigation and advice services. Kevin joined Burke, Williams & Sorensen in August 2012. Prior to joining Burke, Kevin was a Deputy City Attorney for the City of Oakland, where he specialized in writs and appeals. Previously, Kevin was a shareholder at McDonough Holland & Allen, where he litigated cases for public agencies across the State, and a Legal Research Attorney for the San Francisco Superior Court, where he advised judges regarding complex litigation

378 Bruce A. Soublet Mr. Soublet began his legal career in 1978, in private practice in Oakland, California, practicing in the areas of personal, injury, contracts and family law. In 1980 he took a part time job with the Berkeley City Attorneys office to handdle some long dormant personal injury cases. The psition was slaed to last for 6 months, it ultimately led to a twenty year stay in Berkeley. During that time he had the pleasure to work for Natalie West and to share an office and ultimately work for Manuale Albuquerque. He was the City's claims adjuster and managed he tort litigation. In 2001 he left Berkeley to take a position with the City of Richmond. At Richmond he was initially asked to take over code enforcement aciviies but was soon back in the litigation arena, doing many of thethings he did while in Berkkeley. In early 2003, he was assigned to the City's Human Resources Department to assist them on all of their legal maters. He currently serves as the City's in house labor and employment attorney. During that time he has worked through a 35 milliion dollar budget deficit whic resulted in massive layoffs and negotiates with bargaining units to pay the EPMC of their CALPERS pensions starting in 2004. Recently helped negotiate contracts with public safety paying their addiional share by 2016, two years before the PEPRA Requirements kick in. In 2009, he was appointed to the assignment of ADA Coordinator for the City. He was responsible for overseeing the completion of the City's ADA ttransition Plaan and to ensure continuing City compliance with the provisions of State and Federal Disability Law. In addition to these duties he conines to be involved in the tort litigation, serves as counselto the City's Personnel Board and the Revolving Loan Fund Board During his legal career Mr >soublet has served as a Board Member and President of the Board of the following organizations: East Bay Spanish Speaking Citizens Foundation; East Oakland Youth Development Center (EOYDC); Charles Houston Bar Association (CHBA); Wiley Manuel Law Foundation. He is currently on the Board of the Fred Finch Youth Cener and the Lake CHabot Jr. Golf Academy. He has served as a volunteer Settlement Commissiner for the Alameda County Superior Court. He has achieved the Professinal Associate designation for he National Association of ADA Coordinators (NAADAC) and currently serves as president of the California Associationof ADA Professionals (CAADAP). Born and raised in Oakland California, the sixth of ten children. Gratuated Salesian Catholic high School, Richmond California in 1971. Received his BA in Political Science from UCLA in 1975. Recievd his JD from the University of Santa Clara School of Law, in 1978. Mr. Soublet resides in Oakland, Caalifornia, with his spouse of 18 years, Sylvia and their two children Amber age 17 and incomin Freshman at the University of Arizona and Vanneasha,13, and incoming Freshman at ST. Joseph Notre Dame High School Alameda, California

379 Scott Tiedemann Scott Tiedemann is the Managing Partner of Liebert Cassidy Whitmore, California's largest public sector labor, employment and education law firm. Scott is a leading advocate for, and trusted advisor to public safety agencies across California. He is called upon in high profile cases to advise public safety executives regarding how to conduct complex investigations, including how to manage media relations and navigate the procedural complexities of the Public Safety Officers and Firefighters Procedural Bill of Rights. He has earned a reputation for successfully prosecuting many difficult cases involving allegations ranging from excessive force to sexual abuse to fraud. Scott has prevailed in multiple published appellate cases that have helped public safety employers more effectively manage their employees. His published decisions on behalf of public safety employers include, among others: Upland Police Officers Association v. City of Upland (2003) 111 Cal.App.4th 1294, Benach v. County of Los Angeles (2007) 149 Cal.4th 836 and Thompson v. City of Monrovia (2010) 186 Cal.App.4th 860, and Ferguson v. City of Cathedral City (2011) 197 Cal.App.4th 1161. Scott represents a wide variety of other government agencies and schools in labor and employment matters as well. He is a skilled litigator in federal and state courts and a successful appellate attorney, who has handled a variety of litigation matters, including trials and administrative hearings. Scott is also experienced in labor, including relations serving as lead negotiator in collective bargaining with safety and general employee bargaining units. Scott's practice also includes investigations, counseling and management training. He frequently speaks at national and statewide conferences on subjects such as disciplinary investigations, workplace harassment, employment discrimination, free speech, privacy and ethics.

380 Richard Whitmore Richard (Dick) Whitmore began representing management in public sector employment matters in 1970 as Assistant City Attorney for the City of Sunnyvale. He was the founding partner of Whitmore, Kay & Stevens (1976) and Whitmore, Johnson & Bolanos (1991). Following the merger of Whitmore, Johnson & Bolanos with Liebert Cassidy, Dick became a name partner in Liebert Cassidy Whitmore. Although partially retired, Dick continues to advise and consult with public agencies on negotiations, factfinding, arbitration, mediation and related labor relations matters. He is providing training for public agencies like the League of California Cities and CALPELRA. He is also serving as a mediator, factfinder, and arbitrator, both as a neutral and as a management representative on tripartite panels.

381 Patrick Whitnell Patrick Whitnell joined the League in 2005 as Assistant General Counsel, and was named General Counsel in 2007. Prior to joining the League, Patrick was an associate with the law firm of Meyers Nave, working in its Oakland office. He served as City Attorney for the City of San Juan Bautista, and Assistant City Attorney for several cities in the San Francisco Bay Area. Patrick graduated from the University of California, Santa Cruz in Psychology and Linguistics and received his JD from San Francisco Law School. He also holds a master’s degree in Library and Information Studies from the University of California, Berkeley.

382

September 2014 League Annual Conference – City Attorneys’ Track Item No.: 1928